ATB Capital ATB Capital Markets’ Tim Monachello lowered his North American Construction Group Ltd. target to $22 from $28.50, below the $26.60 average, with an “outperform” rating.
“We have reduced our estimates for NOA from Q2/22 to Q1/23 given we expect meaningful near-term margin compression due to 1) cost inflation, which continues to outpace pricing for NACG’s core oil sands contracts, and 2) shortages of heavy-duty mechanics, which we believe could limit NOA’s fleet utilization over the medium term,” he said. “We believe these factors are largely transitory given ongoing conversations with customers regarding retroactive pricing increases and scheduled price escalation in mid-Q3/22 with NOA’s largest customer, and we believe rising wages and improving access to out-of-province labour pools should be tailwinds for recruiting heavy-duty mechanics over the medium term.”