Aecon Group Inc (ARE-T)

Stock's come off almost 40% YTD, a real opportunity to get in. Half of its construction projects are linked to utilities. Does a lot of nuclear construction, refurbishment, and ongoing maintenance. So the projects aren't as discretionary. Stock got ahead of itself, but then concerns about economy set in. Yield is 4.48%.

Government announcements abound with infrastructure and nuclear spending. Whether we're in a recession or not, doesn't expect governments to stop spending on transit projects and the like. Lots of opportunity for public and private spending.

When it comes to Canadian infrastructure investment, there are some good companies out there and already trading at attractive multiples. And that's before accounting for any additional investments post-election in Canada. 

This name will most likely benefit.

EPS of 25c missed estimates of 40c; revenue of $1.26B beat estimates of $1.19B. EBITDA of $76.3M missed estimates by 8%. Revenue rose 12%. EPS doubled year over year. ARE said revenue 'will be stronger in 2025'. The stock did get a downgrade on the miss. Considering the already-low valuation, the 16% decline seems overdone, but it is that type of a 'shoot first' market. It is hardly alone in a big decline this week. Backlog is $6.7B, up $500M from the prior year. It is a small cap company with economic risk in a very bad market. It also screwed up last year with a loss on the Skyport sale. Investors are getting tired of the 'bombs' going off on a regular basis. We think in this environment buyers do not need to be in a rush to accumulate. That being said, it was a takeover target once before and this is always a possibility if the shares stay weak. 
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Recent dip probably not company-specific, whole industrial complex has been hit by tariff scares. A competitor is BDT, with a better financial profile and really good growth profile, so he's more comfortable owning that one.

Good move recently. Benefiting from capital infrastructure spends in Ontario, and this will continue to increase. Nothing wrong with the name, but there are cheaper plays like ATRL and NOA. See his Top Picks.

It's gotten past a lot of its old, fixed-price contracts that really hurt the company for a number of years. ROE is ~9%, at a much lower price-to-book ratio than others. Getting a lot of contracts lately. Prefers this in the space, despite its small $2B market cap.

Has more room to run. It trades at a discount to peers. Its backlog has never grown better. They have a nuclear side to their business at Bruce Power. A lot going on and he likes it.

This got away from him. He held back because these are long-lead projects and there could be labour and permit issues and delays, and their business depends on contracts, jumping from one to another, instead of a reliable stream. That said, they have a ton of projects on the books and have grown into an infrastructure giant.

ARE provides construction and infrastructure development services to private and public sector. Nuclear power certainly does seem like it is a growing part of the business, now at 19% of construction revenues over the last twelve months. Recent second quarter financials were not good, however, the stock jumped as ARE announced a 5% buyback and numerous analysts upgraded their ratings on the expectations that the "worst is likely behind." ARE does have a large backlog at $6.19 billion, and its balance sheet is net cash positive. It is still quite cheap at 15x forward earnings despite being up 89% over the last year and paying a 3.7% yield. If revenue and earnings growth begin to recover in the second half of 2024, the stock could be interesting at this valuation and yield. 
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Global infrastructure building. Past projects haven't necessarily had the best margins. Right-sized all of that. Going to focus on increasing margins. Growing organically and by acquisition. Dividend has about an 8% annual compound growth rate over the last 10 years. Yield is 3.7%.

Trading at half the multiple than historically. Huge backlog with infrastructure projects, so it will continue to grow by picking up projects and by making acquisitions.

November-March: fantastic. Leveled off in recent weeks, as has the sector. Now consolidating, normal. Engineering stocks have picked up recently, but hasn't yet carried through to this name.

Excellent business that will continue to hold. Recent cost over runs not a major concern. Backlog is full with new projects. Have sold off low margin business units. Stock continues to perform. Recent Nuclear contracts being signed. 

Engineering and construction are core businesses, and the construction part is what stops him. Contracts are at the mercy of cost overruns. He owns WSP instead, pure-play consulting and engineering.

Lots of good things. Oaktree partnership to develop US utilities business. Exposure to nuclear. All the pain will lead to better contracting. Real line of sight to doing well. Infrastructure need and spending will benefit them.

Plagued with cost overruns, so paying penalties impacts profitability. WSP is her choice in the sector.