CIBC Raises Targets CIBC World Markets analyst Krista Friesen made a series of target price increases to Canadian engineering and construction companies after assuming coverage on Friday.
“The end-market exposure of each of the companies is a critical factor for us when thinking about each company’s outlook for 2025,” she said. “While we see positive trends across the various end-markets, we highlight ATRL’s and ARE’s exposure to nuclear. We see significant growth opportunities for both companies given the current nuclear renaissance, and the global transition to net zero. With that said, looking more broadly at the construction space as a whole we see a number of government funding initiatives globally and regulatory changes driving increased spending.
“Geographic Exposure: The top geographic exposures for our companies are the U.S., Canada and Europe. While there is an increased level of uncertainty in the U.S. with a new administration coming to power in January, we continue to view the U.S. as the best area for growth in 2025. A notable amount of the funds under various spending acts has already been allocated, and we are of the view that ultimately these funds will not be clawed back. We are also seeing solid private investment in the space, particularly as it relates to EV battery plants and data centers.”
Her changes included:
* Aecon Group Inc. (“outperformer”) to $35 from $29. The average target is $30.64.
Analyst: “Over the past year there have been a number of positive developments in the ARE story, including the company nearing the completion of its legacy fixed-price contracts, movement towards a more stable margin profile, and growth in the Nuclear and Power businesses. As we look to 2025, we expect completion of the legacy fixed-price contracts, which should remove an overhang on the story, and an increased focus on growth opportunities within nuclear and power through ARE’s partnership with Oaktree. While ARE’s share price is up 104 per cent year to date, we foresee continued upside potential.”
* AtkinsRalis Group Inc. (“outperformer”) to $90 from $80. Average: is $83.67.
Analyst: “As we look out to 2025 and the next three years for ATRL, we see significant opportunity for the company, whether it be in nuclear, divesting of non-core businesses, or achieving the Investor Day targets it presented in June of this past year.”
* Badger Infrastructure Solutions Ltd. (“outperformer”) to $52 from $49. Average: $48.75.
Analyst: “We roll over our BDGI model to 2026 and increase our price target.”
* Bird Construction Inc. (“neutral”) to $34 from $29.50. Average: $35.38.
Analyst: “The company’s shares are up over 100%, its combined backlog hit a record $7.9B in Q3, and it hosted a successful Investor Day in October at which it announced solid targets. As introduced in its 2025-2027 Strategic Plan, BDT will focus on key strategic end-markets, which should help drive double-digit revenue growth, and margin expansion. We believe current macro trends support BDT’s goals, and when combined with the company’s ‘One Bird’ strategy, and operational excellence initiatives, we expect BDT to achieve its targets. However, we think the rest of the market also believes that BDT will achieve its targets, resulting in shares which are pricing in perfect execution and a supportive macro environment over the next three years.”
* Stantec Inc. (“outperformer”) to $134 from $121.50. Average: $132.55.
Analyst: “Our investment thesis for STN is predicated largely on that which separates it from its peer group: i.e., the company’s exposure and leading position in Water, and its outsized exposure to the U.S. In terms of potential catalysts, in addition to benefiting from its endmarket and geographic exposure, we believe the company is well positioned to execute on M&A in the near term and also well on its way to achieving the financial targets it outlined at its Investor Day in 2023.”
* WSP Global Inc. (“outperformer”) to $280 from $264. Average: $237.57.
Analyst: “As we look out to 2025 our investment thesis for WSP largely centers on what we believe are three key catalyst opportunities for the company: the integration of the POWER Engineers acquisition and potential earnings upside; the company’s Investor Day scheduled for February; and the potential for more M&A.”
Ms. Friesen added: While we have an Outperformer rating on each of the engineering names, our pecking order in the space is WSP, followed by ATRL, and STN. Within the Construction names we have Outperformer ratings on ARE and BDGI, and a Neutral rating on BDT. Among the Construction names our pecking order is BDGI followed by ARE and BDT.”