CIBC ReportEQUITY RESEARCH
December 12, 2024 Transferring Coverage
BIRD CONSTRUCTION INC.
Pricing In Strong Execution And Supportive Operating
Environment
Our Conclusion
As of December 12, we transfer coverage of Bird Construction (BDT) from
Jacob Bout to Krista Friesen. 2024 has been a stellar year for BDT. 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. We maintain
our Neutral rating with a price target of $34 (prior $29.50) based on a 6.0x
multiple applied to our 2026 estimates.
Key Points
2025-2027 Financial Targets Look Achievable: BDT introduced solid, yet
what we believe to be achievable, financial targets when it hosted its Investor
Day in October. The company is guiding to a revenue CAGR of ~12% (~10%
organic growth CAGR) and EBITDA margin expansion of ~200 bps to 8%. In
the three years prior (2022-2024), BDT grew revenue at a ~16% CAGR and
expanded EBITDA margins by ~170 bps.
Expanding In Key Sectors To Drive Strategic Growth: To reach its 10%
organic revenue CAGR target over the next three years, BDT identified key
strategic end-markets for each of its divisions that BDT believes will help
drive above-market growth, specifically in Industrial and Infrastructure. We
believe that growth in these strategic end-markets will be supported by the
current macro backdrop in Canada, given the demographic trend of an aging
population and a deterioration in public infrastructure.
Valuation Is Pricing In The Outlook: BDT is trading at ~6.3x (2025E
consensus) EBITDA, which is roughly one standard deviation above its
10-year historical average. We believe that this valuation is pricing in both
that BDT will achieve its Strategic Plan and a supportive macro backdrop for
the next three years. Given this valuation, we believe there is limited upside
potential for BDT’s multiple and potential downside of ~3x (reflecting
one standard deviation below its historical range).