Cyclical SNC Is Still a Hold

Article Excerpt

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…