More National Bank National Bank's Mr. Sytchev’s call on Aecon came alongside the release of a report introducing 2026 projections for industrial product companies in his coverage universe and the unveiling of his top picks for the coming year in a report titled Top 10 2025 bifurcations, what worked (or didn’t) in 2024.
Stressing the presence of “many cross currents” in 2025, the analyst thinks the “2026 playbook is favourable” thus far.
“On the one hand, overlaying the 2016 Trump playbook would suggest a positive year ahead for us (up 26 per cent for our coverage 15 months post-presidential election first time around) as, in addition to the perception of a pro-business agenda, rates are being cut now vs. the commencement of a tightening cycle in late 2016.” he said. “The counterpoint is that valuations for our coverage are now 700 basis points to 800 basis points higher on a P/E basis vs. then (S&P 500 NTM [next 12-month] P/E is 500 bps higher). The caveat being of course 2 times higher organic growth momentum for engineers vs. pre-2019; that, plus margin expansion explain a lot of the fundamental revaluation.
“Directionally, it still means that alpha needs to come from EPS growth and accretive M&A as multiple expansion is unlikely to be a major catalyst. While we have seen a recent wobble of Federally exposed names (TTEK, ACM, BAH), IIJA funding is unlikely to be impacted given the program’s substantial appropriations to specific projects while in our coverage the maximum Federal exposure is 5-per-cent (STN). As a result, we skew towards names with the most predictable EPS trajectories, counterbalanced by reasonable valuation (as outright mispriced situations are not exactly present). A postmortem of what went right/wrong for us in 2024 ... RBA/CIGI worked; ATS did not.”
Mr. Sytchev thinks “what-ifs” for 2025 are “dominated by macro factors that, except for sticky inflation” and sees them as “generally neutral” for companies he covers “while the protectionist pivot in North America is actually a net positive given predominantly service-driven revenue generation and/or in situ production capacity in the U.S.
In rolling out his top picks, he said:
“We are slightly expanding our preferred places to allocate capital this year, partly to capture beta in structurally growing areas like consulting (need to own something) while leaning into some self-help & margin expansion + easier comps vs. 2024 dynamic for others. There is also a sweet spot for a Trump trade. STN shares lagged peers in 2024 on the back of a very strong 2023; we believe organic EPS growth will be supplemented by additional M&A that has historically buoyed the stock. RBA had a great 2024 but margin expansion opportunity should lead to further multiple progression; market share gains have come faster than expected. ATS – an annus horribilis due to EV unravelling is finally behind us; market concerns around working capital are real, but a negative outcome appears to be priced in; Healthcare / Food / Nuclear are structural growth areas. FTT Product Support softening + past peak new equipment pricing created an air pocket; we see Canada getting less bad while Chile’s copper momentum should sustain itself; through-the-cycle EPS generation is still getting better. RUS “Easy” Trump trade beneficiary without a premium multiple; clean balance sheet, integration upside from recent M&A and more deals down the line with free HRC / plate pricing optionality.”
With that view and the introduction of his 2026 projections, Mr. Sytchev made these target changes:
- AutoCanada Inc. ( “outperform”) to $25 from $21. The average on the Street is $19.29.
- Ag Growth International Inc. ( “outperform”) to $75 from $72. Average: $71.63.
- AtkinsRalis Group Inc. ( “outperform”) to $87 from $67. Average: $81.58.
- ATS Corp. ( “outperform”) to $54 from $46. Average: $48.71.
- Bird Construction Inc. (“sector perform”) to $32 from $29. Average: $34.44.
- Colliers International Group Inc. ( “outperform”) to US$182 from US$168. Average: US$164.08.
- Finning International Inc. ( “outperform”) to $48 from $47. Average: $47.
- North American Construction Group Ltd. (“outperform”) to $45 from $40. Average: $39.60.
- RB Global Inc. (“outperform”) to US$113 from US$101. Average: US$98.70.
- Russel Metals Inc. ( “outperform”) to $55 from $49. Average: $50.92.
- Stella-Jones Inc. ( “outperform”) to $93 from $90. Average: $89.25.
- Stantec Inc. ( “outperform”) to $140 from $128. Average: $130.32.
- Toromont Industries Ltd. ( “sector perform”) to $126 from $132. Average: $135.22.
- Wajax Corp. (“sector perform”) to $24 from $23. Average: $23.75.
- WSP Global Inc. (“outperform”) to $286 from $279. Average: $277.93.