snc lavalin

BANK OF MONTREAL, $27.48, Toronto symbol BMO, earned $225 million in its first fiscal quarter, which ended January 31, 2009, down 11.8% from $255 million a year earlier. During the quarter, the bank issued about $1 billion of new common shares. Consequently, earnings per share fell 17%, to $0.39 from $0.47, on more shares outstanding. However, the latest quarterly earnings included a $359-million (or $0.69 a share) writedown of illiquid securities, including asset-backed commercial paper, held by the bank’s trading division. If you exclude all unusual charges, Bank of Montreal would have earned $1.09 a share. The slowing economy continues to weigh on the bank’s earnings. Loan-loss provisions rose 86.1% in the latest quarter. Most of this increase came from Bank of Montreal’s U.S. operations, particularly loans related to the commercial real estate and manufacturing industries. The U.S. accounts for about 10% of the bank’s revenue. Overall revenue in the quarter rose by 20.5%, to $2.4 billion from $2 billion. Strong gains at the bank’s personal banking operations in Canada and the U.S. offset slow growth at its corporate lending and wealth management businesses. A new high-interest savings account, the launch of the new Tax-Free Savings Account and new credit cards that provide rewards based on use helped the bank lure more customers during the quarter....

Sherritt International, $2.03, symbol S on Toronto (Shares outstanding: 293.1 million; Market cap: $595 million), is a diversified natural-resource company that produces nickel, cobalt, thermal coal (which is burned for electricity generation), potash, oil and gas. Sherritt also manages 376 megawatts of electricity-generation capacity in Cuba. The company also licenses its proprietary mining technologies to other metals companies. With nine open-pit mines, Sherritt is Canada’s largest thermal coal producer. It is also developing Canada’s first coal gasification project. (Coal gasification is a process for converting coal partially or totally into gases. Like coal, the gases can then be burned to create heat, but they burn much cleaner and generate fewer harmful emissions.) Sherritt also produces about 31,189 barrels of oil equivalent per day from properties in Cuba, Spain and Pakistan. Coal accounts for 53% of Sherritt’s revenues, metals (nickel and cobalt) account for about 25%, oil and gas, 12%, power generation, 8% and other, 2%....

BANK OF MONTREAL $32.30, Toronto symbol BMO, has agreed to buy the Canadian life insurance business of major U.S. insurer American International Group Inc. (AIG). The bank will pay $375 million, which is equal to 19% of the $2.0 billion or $3.76 a share that it earned in the fiscal year ended October 31, 2008. Bank of Montreal’s insurance operations currently supply just 2% of its total revenue, and this purchase will not significantly expand this division’s contribution. However, insurance is a future growth area. As well, Bank of Montreal probably got this business for a bargain price in light of AIG’s severe financial problems. Bank of Montreal is a buy....

SNC-LAVALIN GROUP INC. $38 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 150.7 million; Market cap: $5.7 billion; SI Rating: Average) designs and builds a variety of large-scale projects, such as roads, bridges and electrical power systems. In the three months ended September 30, 2008, earnings rose 46.3%, to $0.60 a share from $0.41 a year earlier. Most of that gain came from its mining and infrastructure divisions. However, revenue fell 5.6%, to $1.7 billion from $1.8 billion, due to problems at a new power plant near Toronto. SNC’s revenue could continue to suffer as the credit crisis could make it difficult for companies to finance big new engineering projects. Engineering and construction projects are also cyclical, and it looks like we’re approaching the end of the current economic cycle. At 18.7 times its likely 2008 earnings of $2.03 a share, SNC is particularly vulnerable to a slowing economy in North America, which accounts for 60% of its total revenue. SNC-Lavalin is still a hold.

SNC-LAVALIN GROUP INC. $33 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 151.0 million; Market cap: $5.0 billion; SI Rating: Average) is a leading engineering and construction company. North America supplies 60% of its revenue. SNC’s stock hit a new peak of $62 in June, 2008. That was partly due to its strong second-quarter earnings. In the three months ended June 30, 2008, SNC’s earnings jumped 83.3%, to $75.4 million from $41.1 million a year earlier. Earnings per share rose 81.5%, to $0.49 from $0.27. However, the big increase was mainly due to the costly bankruptcy of a key supplier to its power plant operations in the year-earlier quarter. Revenue crept up to $1.70 billion from $1.69 billion. The company’s expertise is helping it win new contracts, particularly in overseas markets. For example, SNC has agreed to build a new airport in Libya’s second-largest city for $500 million. It’s also expanding its overseas operations through acquisitions of small engineering firms. SNC recently paid an undisclosed sum for two Romanian engineering companies that specialize in industrial and public infrastructure projects....

Stocks in our Aggressive Portfolio, such as these four, tend to be more highly leveraged and more volatile than those in our Conservative Growth or Income-Seeking Portfolios. These four also operate in the Manufacturing sector, which is generally more risky than, say, Utilities. As well, they serve narrow markets or cyclical industries. Due to the recent stock market turmoil, many investors will consider selling stock from their aggressive portfolio. We feel you should resist the urge to sell high-quality companies, even if they are in your aggressive portfolio, just because you feel they could go lower. We still have a high opinion of these four companies from our Aggressive Portfolio, and they should all rebound strongly as the economy improves. However, only three are buys right now. GENNUM CORP. $6.65 (Toronto symbol GND; Aggressive Portfolio, Manufacturing & Industry sector; Shares outstanding: 35.6 million; Market cap: $236.7 million; SI Rating: Above average) makes equipment that lets broadcasters store, manipulate and transport video signals without losing picture quality. This business accounts for 80% of Gennum’s total sales. The remaining 20% comes from making chips that improve the speed and reliability of transmissions in computer networks....

Despite a stream of nerve-rattling financial news, starting with the failure of the first U.S. bailout package, the Dow Industrials and the S&P 500 managed to hold above Monday’s lows this week until just before Friday’s close. It’s a mistake to read too much into this, of course. But it is encouraging to see these two indexes move sideways in this depressing news environment. The plunge to new lows by the Canadian market reflects the heavy resources content in our economy and stock market. The Resources sector stands to suffer in an economic setback, and that’s already begun to happen with the drop in oil, copper and other metals. In addition to the decline in our market, our dollar lost nearly four cents this past week, relative to the U.S. dollar. We continue to recommend that you spread your investments our across the five main economic sectors, and devote around a quarter of your portfolio to U.S. stocks. Market turnarounds often occur in times of high volatility and bad news. Our advice is to resist any urge you may feel to sell good-quality stocks, just because you fear they may go lower....

ARBOR MEMORIAL SERVICES INC. $25 (Toronto symbol ABO.A; Aggressive Growth Portfolio, Consumer sector; Shares outstanding: 10.7 million; Market cap: $267.5 million; SI Rating: Average) owns 41 cemeteries, 27 crematoria, four reception centres located on cemetery premises, and 88 funeral homes in eight provinces. It earned $0.54 a share in its third fiscal quarter ended July 31, 2008, up 35.0% from $0.40 a year earlier. Revenue rose 8.6%, to $62.0 million from $57.1 million. Thanks to the higher earnings, Arbor now plans to pay quarterly dividends of $0.11 a share, up sharply from its old token rate of $0.0175 a share. That pushed up its yield up to 1.8% from just 0.3%. Arbor Memorial Services is a buy....

SNC-LAVALIN GROUP INC. $54 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 151.0 million; Market cap: $8.2 billion; SI Rating: Average) continues to win new infrastructure contracts. It recently received a $300 million contract to build two natural gas compression plants in France. The company will also participate in the construction of a $200 million U.S. hydrogen plant at an oil refinery in California. These are small jobs next to SNC’s annual revenue of about $7 billion, but add to its current backlog of $10.0 billion. SNC now trades at 29.0 times its projected 2008 earnings of $1.86 a share. That’s expensive considering much of its income comes from engineering projects with uneven revenue streams....

SNC-LAVALIN GROUP INC. $54 (Toronto symbol SNC; Aggressive Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 151.0 million; Market cap: $8.2 billion; SI Rating: Average) continues to win new infrastructure contracts. It recently received a $300 million contract to build two natural gas compression plants in France. The company will also participate in the construction of a $200 million U.S. hydrogen plant at an oil refinery in California. These are small jobs next to SNC’s annual revenue of about $7 billion, but add to its current backlog of $10.0 billion. SNC now trades at 29.0 times its projected 2008 earnings of $1.86 a share. That’s expensive considering much of its income comes from engineering projects with uneven revenue streams. SNC-Lavalin is a hold....