STANTEC INC. $28.57 - Toronto symbol STN

STANTEC INC. $28.57 (Toronto symbol STN; SI Rating: Extra Risk) (780-917-7288; www.stantec.com; Shares outstanding: 45.5 million; Market cap: $1.3 billion) sells a range of consulting, project delivery, design/build and technology services to clients in a number of markets. These markets include industry, environment, transportation and construction. The company has over 9,000 employees in 150 North American locations. In the three months ended June 30, 2009, Stantec’s revenue rose 13.0%, to $388.1 million from $343.3 million a year earlier. However, excluding acquisitions and foreign-exchange gains, revenue actually fell by $49.8 million. The company’s earnings rose 1.1%, to $22.4 million, or $0.49 a share, from $22.1 million, or $0.48 a share, a year earlier. Higher costs pushed down Stantec’s profit margins in the quarter. Stantec has made fewer acquisitions than usual this year, but it bought five companies in 2008. Its goodwill is high at $581.1 million, or 44.0% of market cap, but it keeps acquisitions small and retains the management of the firms it buys where possible. It also cuts costs by sharing administrative overhead, offices, financing and employee benefits between its divisions. Private-sector spending remains weak, so the company will likely see slower growth for at least the rest of this year. Government infrastructure spending may eventually compensate for this, but it could take until early 2010 before it has much effect. Stantec is still a hold.

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