Stantec’s revenue surged 19% thanks to its successful acquisition strategy that featured recent purchases in Ontario, Germany, and England. This growth translated into a 38% increase in earnings before unusual items.
Meanwhile, a strong balance sheet and an aggressive growth plan aim to boost annual revenue from $5.9 billion in 2024 to $7.5 billion in 2026, with projected earnings per share growth of 15% to 18% annually.
The stock trades at 23.1 times that forward earnings forecast, offering a reasonable valuation for a leader in the engineering and consulting industry that’s ready to deliver sustained gains.
STANTEC INC. (Toronto symbol STN; www.stantec.com) is a leading seller of consulting, project-delivery, design and technology services. Stantec’s clients operate in a variety of industries, including oil and gas, transportation and construction.
The U.S. provides 51% of its revenue, followed by Canada (24%) and other countries (25%).
Stantec tends to use acquisitions to spur its growth—it has acquired over 135 companies since 1994. The company cuts the risk of using acquisitions to expand by targeting smaller, easy-to-absorb firms. Moreover, sharing administrative expenses, financing and employee benefits among its businesses helps lower overall costs.
In 2024, Stantec spent a total of $672 million to buy three smaller engineering firms in Ontario, Germany and England.
Those new businesses helped lift Stantec’s revenue in the fourth quarter of 2024 by 19.0%, to $1.48 billion from $1.24 billion a year earlier. That beat the $1.42 billion consensus forecast. If you exclude those purchases, revenue gained 9.3%.
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Also, earnings before unusual items jumped 38.1%, to $126.2 million from $91.4 million. Due to more shares outstanding, per-share earnings improved at a slower rate of 35.4%, to $1.11 from $0.82.
Stantec remains in a strong position to keep adding new businesses. In fact, the company recently acquired Morrison Hershfield. Based in Markham, Ontario, this engineering firm specializes in transportation, buildings and environmental projects.
This purchase is now paying off. The City of Toronto has awarded Morrison a new contract to help with the rehabilitation of the Gardner Expressway, an elevated highway that runs along the shore of Lake Ontario.
This contract is worth $24 million. While that’s small in relation to its annual revenue of $7.1 billion, the company’s strong reputation should continue to help it win even more contracts.
Stantec: Ambitious growth plan targets climate change and digital innovation
Stantec has a new growth plan to mitigate the impact of climate change while making better use of digital technologies, including artificial intelligence, to improve efficiency.
The plan should lift the company’s annual revenue from $5.9 billion in 2024 to $7.5 billion in 2026. The company forecasts its earnings per share will rise 15% to 18% annually between 2024 and 2026.
In 2025, Stantec’s earnings will probably rise to $5.17 a share, and the stock trades at a reasonable 23.1 times that forecast.
With the April 2025 payment, Stantec will raise your quarterly dividend by 7.1%. Investors will then receive $0.225 a share instead of $0.21. The new annual rate of $0.90 yields 0.8%.
Including this latest increase, Stantec’s dividend has grown at an average annual rate of 7.7% in the past five years. The stock holds an Above Average TSI Dividend Sustainability Rating.
Recommendation in Dividend Advisor: Stantec Inc. is a buy.
