TSX:ATRL - Post Discussion
Post by
retiredcf on Nov 15, 2024 8:42am
RBC 2
Their upside scenrio target is now $98.00. GLTA
Outperform
TSX: ATRL; CAD 74.24
Price Target CAD 84.00 ↑ 70.00
AtkinsRealis Group Inc. A Nuclear quarter
Our view: Q3 results reflected another quarter of solid execution in AtkinsRealis’s Engineering segment and significant growth in the Nuclear business. Backlog in AtkinsRealis Services (core business lines) also reached another record high. Overall, the setup for AtkinsRealis remains supportive and the company is well positioned to deliver on its full-year guidance, in our view. Price target +$14 to $84; reiterating Outperform rating.
Key points:
Thoughts exiting Q3 – AtkinsRealis posted a strong quarter and reiterated its 2024 guidance (see inside for details). Q3 results reflected continued progress in the go-forward/core business with organic growth of +13.5% in AtkinsRealis Services, reflecting +8.4% from Engineering Services Regions (the Design/ Engineering/O&M business) and +34.7% from the Nuclear segment. The volume of investor inbounds related to AtkinsRealis has been elevated over the last recent months, with investors interested in the re-rating potential of the Engineering segment, as well as the Nuclear opportunity (the latter being of greater interest). The combination of a strong Q3 print, good backlog growth, and optimistic forward-looking commentary likely provide investors comfort that the strong results over the recent quarters are likely to continue for the foreseeable future (i.e., the company remains well positioned to deliver on its 2027 targets). While the Engineering business continues to trend well, there has been an even greater inflection in the Nuclear segment trends through 2024 (Nuclear segment full-year guidance calls for 30–35% growth). Given that a notable proportion of the newer investor interest in AtkinsRealis has been related to the Nuclear segment, the strong results and continued backlog growth in this segment likely validated the favorable views coming into the print (and likely contributed to today’s +16% share price reaction). Overall, we believe the company remains well positioned to deliver on its operational targets, with a potential sale of the 6.76% interest in the 407 ETR offering upside optionality (i.e., the sale proceeds could be directed toward M&A/ return of capital).
Backlog at record high – Q3 backlog totaled $16.8B (+34.7% YoY), with Nuclear segment backlog reaching a record high of $3.2B (see our note here detailing a recent win). The company continues to capitalize on the opportunities across both the Engineering segment (which is reporting organic growth in line with / above the peer group) and the Nuclear segment (where a global renaissance is driving significant demand for the company’s specialized services).
Balance sheet in good shape – Q2 leverage was 1.4x (-1.3 YoY, -0.5x QoQ). FCF guidance of +$400MM in 2024, combined with the outlook for further improvement in the leverage ratio, provides management meaningful optionality. In addition to internal investments, tuck-in/bolt-on acquisitions (primarily in the U.S. market) are likely to be in focus.
Be the first to comment on this post