SNC-LAVALIN GROUP INC. (Toronto symbol SNC; www.snclavalin.com) has held up well in the face of negative press coverage, beginning with $56 million U.S. in unusual payments it made in 2011 to help win Libyan construction contracts. Lately, the company has come under scrutiny over allegations of widespread corruption in the Quebec construction industry.
SNC’s quick response to these situations, including replacing its chief executive officer and other executives, helped prevent permanent damage to its 102-year-old reputation. It has also brought in stronger oversight and compliance procedures.
Due to higher than-expected costs on a powerplant project, SNC’s 2012 earnings fell 18.4%, to $309.1 million, or $2.04 a share. In 2011, the company earned $378.8 million, or $2.49 a share.
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Canadian stocks: SNC Lavalin considers sale of concessions, raises dividend
Even with the Libyan controversy, SNC continues to win new engineering contracts. That helped push up its revenue by 12.2% in 2012, to $8.1 billion from $7.2 billion. The company ended the year with an order backlog of $10.1 billion, which is equal to 1.25 times its 2012 revenue.
SNC is now conducting a strategic review of its operations. This could include selling some of its concession investments. (Concessions are rights granted by governments to run public facilities.)
The stock is up 31.0% from its September 2012 low of $34.36. It now trades at 18.8 times the $2.39 a share that SNC will probably earn in 2013. The company has also raised its quarterly dividend by 4.5%, to $0.23 a share from $0.22. The new annual rate of $0.92 yields 2.0%.
In the latest edition of The Successful Investor, we look at SNC Lavalin’s strategic review and whether it will set the stage to further boost revenue and the company’s backlog and also whether it will lead the way to further dividend increases. We conclude with our clear buy-sell-hold advice on this stock.
COMMENTS PLEASE—Share your investment knowledge and opinions with fellow TSINetwork.ca members
SNC Lavalin has had a barrage of negative media coverage that has persisted for over a year. When a stock attracts negative publicity, do you tend to think it’s not worth keeping the stock? Or do you dig deeper to see whether a company you trusted with your money is still fundamentally sound and able to overcome its problems? Who do you rely on to help you make that judgement? Let us know what you think.
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I think SNC Lavalin is a good investment and with what I had read in the Successful
Investor I bought when it bottomed out.
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I think SNC Lavalin is a good investment and with what I had read in the Successful
Investor I bought when it bottomed out.