Increased contract wins led to a 14.5% jump in revenue for Stantec during the most-recent quarter.
A recent power generation contract has only increased the company’s substantial backlog, meaning there is plenty more growth to come.
Meanwhile the stock trades at 25.4 times the company’s 2023 earnings forecast.
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STANTEC INC. (Toronto symbol STN; www.stantec.com) offers you exposure to this 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.
Stantec’s strong reputation continues to help it win new contracts. For example, the South Carolina Public Service Authority (operating as Santee Cooper) has selected Stantec to design new wastewater treatment systems at two of its power generation facilities. That will help them comply with increasingly stringent environmental regulations.
The company has not yet said how much this new deal is worth. However, it expands on a previous contract with Santee Cooper.
Growth Stocks: Stantec’s revenues and earnings both rise substantially with more to come
The engineering firm also tends to use acquisitions to spur its growth. It cuts related risk by targeting smaller firms that are easy to absorb.
Thanks partly to recent purchases, as well as new contracts, the company’s revenue in the quarter ended June 30, 2023, rose 14.5%, to $1.28 billion from $1.12 billion a year earlier. That beat the consensus forecast of $1.23 billion. If you factor out acquisitions and currency rates, revenue still improved 11.2%.
The gains also helped lift Stantec’s earnings before acquisition-related costs and other unusual items by 19.3%, to $0.99 a share from $0.83. That also topped the consensus estimate of $0.94.
Stantec ended the quarter with a record contract backlog of $6.58 billion, up 11.4% from the end of 2022. It expects to complete those jobs over the next 13 months.
The company also expects its earnings in 2023 will rise between 12% and 15%, up from its previous forecast of 9% to 13% growth. Using the midpoint of that new range, it will probably earn $3.55 a share this year, and the stock trades at a reasonable 25.4 times that estimate.
The company last raised your quarterly dividend with the April 2023 payment. Investors now receive $0.195 a share, up 8.3% from $0.18. The new annual rate of $0.78 yields 0.9%.
Stantec’s dividend has now grown at an average annual rate of 7.2% in the past five years. The stock holds an Above Average TSI Dividend Sustainability Rating.
Recommendation in The Successful Investor: Stantec Inc. is a buy.