Multiple Upgrades Following the release of “solid” first-quarter financial results, Desjardins Securities analyst Benoit Poirier sees WSP Global Inc. (WSP-T) possessing “a compelling cocktail of organic growth, cross-selling opportunities and M&A.”
After the bell on Wednesday, the Montreal-based professional services company reported adjusted EBITDA of $241-million, exceeding the estimates of Mr. Poirier and the Street ($216-million and $220-million, respectively), which the analyst said was “driven by execution and improved productivity.”
“Management is optimistic for the year,” he said. “WSP expects net revenue of $7.5–8.0-billion (consensus was $7.8-billion; we had forecast $7.7-billion), which implies organic growth of 2–5% for the year (we expected 2.8 per cent). Meanwhile, adjusted EBITDA should be C$1,220–1,290-million (consensus was $1,194-million; we had forecast C$1,217-million). WSP is currently in hiring mode to execute on its healthy backlog and robust pipeline of opportunities.”
Already seeing the cross-selling opportunities brought by the late 2020 acquisition of Golder Associates, Mr. Poirier thinks management is likely to remain active on the M&A front.
“Since the announcement of the Golder acquisition, WSP has realized four tuck-in acquisitions totalling 605 employees in strategic sectors and geographies. While the focus will likely remain on tuck-ins throughout the integration, we believe WSP’s solid balance sheet will enable management to consider another transformative acquisition once the integration is completed (9–12 months post closing would be reasonable, in our view),” he said.
After raising his earnings expectations for 2021 and 2022, Mr. Poirier increased his target for WSP shares to $147 from $127. The average is $138.62.
“We believe WSP’s solid M&A track record and balance sheet combined with its diversified and resilient platform warrant our bullish stance,” he said.
Other analysts making target changes include:
* RBC Dominion Securities analyst Sabahat Khan to $148 from $139 with an “outperform” rating
* CIBC’s Jacob Bout to $150 from $145 with an “outperformer” rating.
* Scotia Capital’s Mark Neville hiked his target to $140 from $125 with a “sector perform” rating.