SNC-LAVALIN GROUP INC. $52 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 151.2 million; Market cap: $7.9 billion; Price-to-sales ratio: 1.3; Dividend yield: 1.3%; SI Rating: Average) is a leading Canadian engineering and construction company. SNC designs and builds large-scale public-works projects, such as roads, bridges, transit systems and water-treatment plants. It also builds mines, chemical plants and electrical-power systems. The company gets 55% of its revenue from North America.
SNC also runs plants and facilities for its clients. For example, in 2009 the company received a 29-year contract from the Province of Quebec to build and operate a new concert hall for the Montreal Symphony Orchestra. The new hall should open in mid-2011. Steady revenue streams from deals like this help cut SNC’s risk. The company now gets 30% of its revenue from services.
In 2009, SNC’s revenue fell 14.1%, to $6.1 billion from $7.1 billion in 2008. That’s mainly because the recession prompted many of SNC’s clients in the mining, electrical-power and chemical industries to put off investing in new plants. However, SNC’s 2009 earnings rose 15.1%, to $2.36 a share (or a total of $359.4 million) from $2.05 a share (or $312.5 million) in 2008. SNC’s earnings mainly rose because it paid less for building materials and labour.
SNC’s $348.0 million of long-term debt is a low 4% of its market cap. It holds cash of $1.2 billion, or $8.07 a share.
The company’s strong financial position let it raise its quarterly dividend by 13.3%, to $0.17 a share from $0.15. The new annual rate of $0.68 yields 1.3%. SNC will probably earn $2.37 a share in 2010. The stock trades at 21.9 times that figure. That’s high, considering that government stimulus spending on infrastructure projects will slow over the next year or so.
SNC-Lavalin is a hold.
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