STANTEC INC. $67.93 - Toronto symbol STN

STANTEC INC. $67.93 (Toronto symbol STN; TSINetwork Rating: Extra Risk) (780-917-7288; www.stantec.com; Shares outstanding: 46.8 million; Market cap: $3.1 billion; Dividend yield: 1.1%) sells a range of consulting, project-delivery, design and technology services. Its clients operate in a variety of industries, including oil and gas, transportation and construction.

In the quarter ended June 30, 2014, Stantec’s revenue rose 13.0%, to $530.3 million from $469.4 million a year earlier. Earnings gained 22.6%, to $44.3 million, or $0.95 a share, from $36.1 million, or $0.78.

Timely move into Quebec

The company continues to grow by acquisition. Its latest is Montreal-based Dessau, a distressed firm that’s one of a number of companies caught up in a Quebec government inquiry into corruption in the construction industry. Under the deal, Stantec won’t be responsible for any of the millions of dollars in fines or penalties Dessau may have to pay.

Adding Dessau will make Stantec the country’s second-biggest engineering firm, behind SNC-Lavalin. Dessau is also involved in bids for two of Quebec’s largest construction contracts: the replacement of Montreal’s Champlain Bridge and Turcot Interchange. Stantec raised its quarterly dividend by 12.1% earlier this year, to $0.185 from $0.165. It yields 1.1%. The company plans to split its shares on a 2-for-1 basis, effective November 14, 2014.

The company cuts its costs by sharing administrative expenses, financing and employee benefits among its divisions. But continually buying new firms adds risk, including the risk of writedowns.

Stantec is a hold.

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