TSX:WSP - Post Discussion
Post by
retiredcf on Mar 01, 2024 10:39am
RBC
Their upside scenario target is $262.00. GLTA
Outperform
TSX: WSP; CAD 213.33
Price Target CAD 237.00 ↑ 212.00
WSP Global Inc. Well positioned for 2024
Our view: We reiterate our positive view of WSP Global Inc. (“WSP”) following Q4 results that were in line to ahead of RBC/consensus expectations. Looking ahead, we believe the confluence of several factors (elevated demand across regions/end-markets, continued progress on the ERP implementation, balance sheet in line with management's targeted range) should position WSP for a solid 2024 as the company continues to execute on its growth strategy. Increasing PT +$25 to $237 and reiterating Outperform.
Key points:
Thoughts exiting Q4 – Q4 results were generally in line to ahead of expectations, with Net Revenue of $2,756MM vs. RBC/consensus of $2,755MM/$2,791MM and Adjusted EBITDA of $524.9MM vs. RBC/ consensus of $508.3MM/$520.7MM. Additionally, WSP initiated 2024 guidance which reflects +5% to +8% organic growth (a higher range than recent years, highlighting an improving outlook) coupled with margin expansion ahead of the cadence outlined in the company's 2022-2024 strategic plan (both of which we view favorably – see inside for further results and guidance details). At a high level, WSP continues to see broad- based strength across its regions and end-markets (organic growth was positive across each of WSP's business units in Q4 and for the full year) and the company continues to execute well amid this elevated demand backdrop (for reference, Q3 and Q4 2023 were WSP's two highest-margin quarters on record). The outlook also remains generally favourable and is supported by the company's $14.1B backlog (~11.8 months of revenue).
ERP implementation progressing well – On WSP's ERP investments (recall this is a multi-year internal initiative to drive further operational improvements), the update this quarter was that WSP's U.S. operations have now been integrated onto the new platform (Canada was moved over in Q1), with the U.K. business next on the docket (should be implemented during 2024). Given WSP's focus on and volume of M&A, we think the eventual consolidation of the company's businesses onto a common ERP platform (which should streamline operations and make integrating newly- acquired businesses easier to some extent, in our view) will be a notable milestone.
Balance sheet in good shape, well positioned to pursue M&A –
Leverage exiting Q4 was ~1.5x (~2.0x including leases), right in line with management's ~1.0x-2.0x target range. Additionally, WSP highlighted that recent acquisitions have largely been integrated, with leadership teams in place and results trending in line with management expectations. Taken together with the company's solid balance sheet, we think WSP is well positioned to execute on its M&A growth strategy (we see elevated seller expectations and higher rates as the likely drivers of "slower" M&A activity levels across the global engineering space).
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