Topics Growth Stocks

Stuart Olson Inc. $6.36 - Toronto symbol SOX

STUART OLSON INC. $6.36 (Toronto symbol SOX; TSINetwork Rating: Speculative) (780-454-3667; www.stuartolson.com; Shares outstanding: 26.7 million; Market cap: $166.8 million; Dividend yield: 7.6%) mainly operates in Western Canada, with both government and private sector clients. Its services include construction, earthmoving, industrial insulation, and electrical contracting for commercial and industrial projects.

In the three months ended March 31, 2016, revenue fell 14.1%, to $243.0 million from $282.9 million a year earlier. The decline came from reduced activity in Alberta’s oil sands and across the province.

That lower revenue is reflected in the earnings drop. Stuart Olson lost $900,000, or $0.03 a share, in the quarter, compared to a profit of $1.0 million, or $0.05, a year earlier.

Wildfires are hurting 2016 profits

The company’s dividend yields a high 7.8% and appears safe. Stuart Olson now expects to make $0.36 a share this year, down from its earlier forecast of $0.52. That’s because it had to shut down a number of projects due to wildfires in Fort McMurray, Alberta.

Earnings could rise to $0.80 a share next year, and the stock trades at just 7.8 times that estimate. However, the estimate could prove optimistic if low oil and gas prices continue to hurt Western Canadian construction and oil sands activity.

The company holds cash of $42.8 million, or $1.61 a share. However, Stuart Olson’s long-term debt of $115.2 million is a high 69% of its $166.8 million market cap. That adds risk.

Stuart Olson is still a hold.

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