Bullboard - Stock Discussion Forum Atkinsrealis Group Inc T.ATRL

Alternate Symbol(s): SNCAF

Industrials Conglomerates

Atkinsrealis Group Inc., formerly SNC-Lavalin Group Inc., is a professional services, and project management company. It delivers end-to-end services across the whole life cycle of an asset including consulting, and advisory and environmental services. Its segments include Engineering Services; Nuclear; O&M; Linxon; LSTK Projects, and Capital. The Engineering Services segment includes... see more

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TSX:ATRL - Post Discussion

Atkinsrealis Group Inc > TD Notes

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Post by retiredcf on Jul 24, 2024 8:14am

TD Notes

ENGINEERING & CONSTRUCTION Q2/24 PREVIEW; REVENUE/MARGIN GAINS SEEN PERSISTING

THE TD COWEN INSIGHT

In this report, we review our outlooks, earnings expectations, and target prices for the Engineering & Construction companies in our coverage universe. We remain constructive on the outlook for the broader group of E&C companies we cover heading into the Q2/24 reporting season, with a continued relative preference for the engineering services firms vs. the construction companies we follow.

The E&C companies in our coverage universe will start reporting Q2/24 results this week, starting with Aecon Group Inc. (ARE-T) on July 24, after market close.
In general, we expect key focus areas during the Q2/24 earnings season to be: rates of revenue growth and margin improvement, 2024 guidance, the ramp-up in IIJA spending in the U.S., PFAS-related opportunities, and prospective M&A commentary.
Supported by what we see as a currently favourable overall demand backdrop (i.e., in areas including infrastructure, power/energy transition, and earth & environmental), along with generally robust backlogs (most covered names had backlogs at or near record levels last quarter), we remain constructive on the outlook for the broader group of E&C companies we cover.
We have made modest upward adjustments to our forecasts for most of the group's members. That said, our Q2/24 estimates are generally in line with consensus. We have also modestly increased our target prices for three of the five names under coverage (ATRL-T, STN-T, and WSP-T), driven primarily by slight increases in our target valuation multiples. All our recommendations are unchanged.
Forecast y/y organic revenue growth rates vary by company, but we are generally in the mid- to high-single-digit range for Q2/24. Similarly, we expect most group members to report higher y/y adjusted EBITDA margins in Q2/24.
Regarding 2024 guidance, as we have noted in the past, we believe there is potential upside to ATRL-T's Engineering Services Regions (ESR) segment's 8–10% organic revenue growth outlook (the segment delivered 17.9% y/y organic growth in Q1/24). Meanwhile, we believe all the other group members who have provided overall revenue/ revenue growth guidance for 2024 may have room to modestly increase their guidance to account for the various acquisitions made year-to-date.
AtkinsRealis Group Inc. (ATRL-T) continues to be our top pick in the group (BUY-rated; $76.00 target price). We are positive on the growth outlooks for ATRL's ESR and Nuclear segments, we view the margin improvement potential within ESR favourably, and we see the stock's valuation as attractive, considering its notable discount vs. peers.