Bullboard - Stock Discussion Forum North American Construction Group Ltd T.NOA

Alternate Symbol(s): T.NOA.DB.B | NOA | T.NOA.DB.A

North American Construction Group Ltd. is a Canada-based company. The Company provides a range of mining and heavy civil construction services to customer in the resource development and industrial construction sectors within Canada, the United States, and Australia. Its segments are Heavy Equipment - Canada, Heavy Equipment - Australia, and Other. Heavy Equipment - Canada and Heavy Equipment -... see more

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TSX:NOA - Post Discussion

North American Construction Group Ltd > TD

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Post by retiredcf on May 02, 2024 8:23am

TD

Q1/24 RESULTS, UNCHANGED GUIDANCE CONFIRM OUR OUTLOOK, INVESTMENT THESIS

THE TD COWEN INSIGHT

Following recent share price underperformance, we upgraded North American Construction Group (NACG) to BUY on April 18, 2024 (full report). To support this view, we compared NACG to four Australian mining services peers given its recent acquisition of MacKellar. With Q1/24 results operationally in-line, and guidance unchanged, we are maintaining our BUY rating and $34.00 target price.

Event: NACG reported Q1/24 results. Impact: NEUTRAL

Q1/24 Results Operationally In-line: Consolidated revenues were 10% below our estimate due in part to Heavy Equipment - Canada segment revenues that were 11% below our estimate due to factors described below. This was almost entirely offset by stronger-than- expected gross margin performance across all segments (consolidated gross margin of 30.7% vs. our estimate of 28.5%). NACG reported Q1/24 EBITDAS of $94.0 million, above our estimate of $89.4 million, however, we note that Actual EBITDAS adds back $4.5 million in Nuna restructuring, whereas our estimate embedded an expectation for these charges in G&A. The variance between our estimates and actual results is explained by this difference, and we view EBITDAS as operationally in-line. Details on Page 4.

Management Outlook Commentary Focused on Quarterly Distribution of Guidance:

Q1/24 EBITDAS represented 21% of the midpoint of management's $430 million to $470 million annual guidance range (prior guidance was 20%). This was due to several factors including: a 30% reduction in Canadian equipment utilization as the fleet is mobilized from Fort Hills to the Millennium mine as well as an overall reduction in scope from Suncor, typical seasonal rainfall in Australia, and typical seasonality at the Nuna JV.
Management is guiding to a 45%/55% H1/H2 EBITDAS split in 2024, with Q3/24 being the strongest quarter of the year and Q1/24 being the weakest. Notably, 20 haul trucks are being mobilized from the Oil Sands to Australia, with commissioning in late-Q3/24. Q3/24 will also feature seasonal strength from its Australian operations and Nuna, as well as peak activity at the Fargo-Moorehead project.

Estimate Changes: Our estimates increase to reflect the headline beat in the quarter, with go-forward estimates largely unchanged. Our revised 2024 EBITDAS estimate of ~$450 million is in line with the mid point of management's unchanged guidance range. We are not making any material changes to our 2025 estimates.

Conference Call: Management will host a conference call at 9:00 a.m. ET; dial: 1-800-717-1738.