Jordan ZinbergBird ConstructionBDT.TOHOLDJan 15, 2025

On fire. A bit technically overbought. The $11B backlog is great. Data centre contract with BCE. Multiple's not expensive at 16x 2027 PE for 30% growth. Trades at a higher multiple than WSP and ATRL, as it's riskier. Try to get it cheaper.

Sentiment is the reverse for WSP and ATRL. Fears of AI disruption curtailing growth. Both look meritorious at these levels. He models 17% growth for ATRL at 14x PE. WSP models 17% growth at 12.5x PE. These 2 are more of a Buy, wouldn't sell.

The chart of 2024-5 was rangebound, then broke out. It's overbought now after a break out.

It has a high valuation with free cash flow of $1.30. The construction business is volatile and backlogs can change with a slowdown. They say their margins are going up 80% next year but margins are 67% in the industry in general so he is not betting on outsized margins.

Very bullish, despite stock runup. He wouldn't be trimming or selling aggressively.

Big backlog. Clear path to margin expansion. Directly exposed to Build Canada theme. Multi-year visibility for business to grow organically at fast pace. Strategic acquisitions. Top management.

Federal government and infrastructure are the keys here. Small cap, not a lot of eyeballs on it. He likes to get in early. It can grow on its own merits and organically to become a large-cap stock. 

Over 75% of combined backlog is in a collaborative model. Moved from cyclical contractor to a more diversified infrastructure platform. Recently announced combined backlog of $10B -- multi-year revenue visibility. Should see steadier revenue and profitability growth. Up this year, but long road to go. 

Pays dividend monthly. If FCF grows as he expects, dividend should grow. Yield is 1.87%.

No qualms about buying. General contractor that builds industrial buildings and infrastructure. Energy, defense, trade/transport, healthcare, nuclear. Good grower and compounder, growing dividend at a 10% compound pace over last 8 years. Trades at 15x PE, all-time highs. Strong chart with higher highs/lows. Market cap is fairly small at $2.3B. Yield is ~2%.

Some pretty high-profile contracts in its backlog or underway. Examples include Peel Memorial Hospital in the GTA, BHP Jansen potash mine, Bruce Power nuclear. 

He has a better idea, though it's not a perfect substitute for this name. See his Top Picks.

Directly exposed to the Build Canada theme. 100% of its business is in Canada. Massive pickup in its backlog, and that backlog is coming in at much higher margins than the current business. Highly visible, high predictable. Expects margin expansion, high profitability, and free cashflow generation. 

Extremely cheap. High-quality business, so even multiple expansion is possible. Whether a company has enough resources to meet the backlog is a good question, and this company has a good track record of doing so. Reputation is on the line if it doesn't deliver. Yield is 2.85%.

Will benefit from PM Carney's new infrastructure projects. They have a massive backlog. The stock did well for a while till it missed a quarter and sold off. Growth will resume and margins will expand next year. Well run.

Tiny, with market cap only ~1B. Tough year for contractors. Flipside is Government of Canada infrastructure spending will bode well. Beat expectations. Trade issues holding back spending in short term. $10B backlog. Nice entry point for long-term hold.

One issue is that every once in a while they take a fixed-price contract and lose $$ on it. A risk that keeps the valuation low. Sector should have some growth with planned infrastructure spending. Needs a bit more consistency in execution and meeting estimates.

It's just OK. He prefers the larger companies like WSP and STN in terms of safety, especially as we don't know which way the economy's going to go in the next couple of years. BDT is relatively small, so investors would be quick to sell if things get dicey.

EPS of $0.50 slightly missed estimates of $0.504 and sales of $850.77M missed estimates of $946.31M. The quarter was impacted by temporary project delays as its clients adapted to rapidly chaning market conditions. Its next quarter is expected to be impacted by similar delays, and this caused some analyst price target cuts, which led to its price decline. Sales and earnings declined year-over-year, and while its gross margins expanded, it was not enough to offset the decline in sales. It has had a strong run since 2023, but with a slowdown in future growth expectations, we think investors will need to be patient on this one. It is priced decently at 10X forward earnings and 0.4X forward sales, but investors will likely want to see growth expectations resume their upward trend before the stock can see positive momentum again.
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A lot of names in the space have had monster moves but now correcting. Coming right back to important support around $24.50. Next big support ~$22. Probably get a bit of a dead cat bounce, and then chop around for a bit more if his broader correction call is right.

Today is timely to nibble a bit, but give it some more time over the next month or so. That's when he'd really be adding exposure.

Really likes. Numbers are fantastic. Within the engineering/construction space, this is the one to own. He hasn't bought more as his method is to buy stocks as they're working higher, and this one wasn't. Trades at 6-7x PE, with ROIC north of 20% every year. Excellent management. Consistent, large contract wins.

There has been no material news, and the last news of any kind was a target price upgrade at National Bank in early December. Small caps had a rough December, and tariff fears are playing out in many sectors. But we have no news here and would consider it quite attractive today. 
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