ace1mccoy wrote: Q2/21 EBITDA Beats Expectations; Reiterating BUY
Event
Aecon reported headline Q2/21 adjusted EBITDA that was ahead of
expectations and backlog increased ~10% q/q. Meanwhile, Aecon's outlook
commentary is little changed from last quarter.
Impact: POSITIVE
Headline Q2/21 adjusted EBITDA was $61.3mm — ahead of consensus and
TD, both at $53.5mm.
We note that results include an amount received pursuant to the Canada
Emergency Wage Subsidy (CEWS) program (not quantified, but not believed
to be particularly meaningful), whereas our forecast (and, to our knowledge,
consensus) did not include any CEWS benefit.
Consolidated revenue of $971mm (+25% y/y) was above both consensus of
$908mm and our $958mm estimate. Construction segment revenue of $955mm
(vs. TD at $941mm) was +23% y/y.
Aecon continues to see its overall outlook for 2021 as positive, supported
by its strong backlog, recurring revenue programs, and the pipeline of bidding
opportunities for new work (although Aecon once again indicated that the
COVID-19 pandemic is expected to continue to have some impact in moderating
overall revenue and profitability growth expectations in 2021).
Backlog totalled $6.5bln, down 10.1% y/y, but up 10.3% q/q. New awards of
$1.6bln represented the highest quarterly total since Q2/18. Q2/21 TTM recurring
revenue was $617mm, up 16% q/q and up 23% y/y.
We have made relatively minor adjustments to our forecasts (our 2021 and
2022 revenue and EBITDA estimates have increased slightly). Our target price
increases to $24.00 (from $22.00), driven primarily by a modest increase in our
Construction operations target valuation multiple.
TD Investment Conclusion
Although COVID-19 uncertainties persist, we are encouraged that ARE has
witnessed an improvement in its operating environment. ARE's diverse end-market
exposure, backlog, new-award prospects, and long-term margin improvement
potential support our positive view on the company. We reiterate our BUY rating