On today’s Breakouts report, there are 54 stocks on the positive breakouts list (stocks with positive price momentum), and 18 stocks are on the negative breakouts list (stocks with negative price momentum).
Featured today is a dividend stock that surfaced on the positive breakouts list – Bird Construction Inc. (BDT-T). Between mid-2016 and 2020, the share price was in a downtrend. However, 2021 has been a turnaround year for the stock with the share price rallying 30 per cent.
The stock has a unanimous buy recommendation from nine analysts and a 12-month forecast price return of 17 per cent, not including the attractive and stable 3.8-per-cent dividend yield.
A brief outline on Bird is provided below that may serve as a springboard for further fundamental research when conducting your own due diligence.
The company
Ontario-based Bird Construction is a construction company with operations across the country.
Investment thesis
- Government pledges on infrastructure investments.
- Rebound in economic activity.
- Record revenue and earnings.
- Record backlog of $2.7-billion, a reflection of future revenue.
- Healthy balance sheet.
- Reliable dividend.
- Attractive dividend yield.
- Compelling valuation.
- Key drivers: 1) Aecuring additional contract wins; 2) acquisitions that will further diversify the company’s revenue profile and geographic exposure; and 3) margin improvement.
- Potential risks to considers: 1) The company is forecast to deliver slow and steady growth, not explosive growth.
Quarterly earnings results
After the market closed on Aug. 10, the company reported better-than-expected second-quarter financial results. The company reported record revenue, record earnings before interest, taxes, depreciation and amortization (EBITDA), and record earnings per share fueled by acquisition growth. Revenue came in at $556-million, surpassing the consensus estimate of $520-million. Adjusted EBITDA was $30-million with an adjusted EBITDA margin of 5.4 per cent. The Street was anticipating adjusted EBITDA to come in at $19-million. Adjusted earnings per share was 28 cents, exceeding the Street’s estimate of 14 cents.
During the quarter, the company was awarded several contracts that added $639-million to its backlog, including a residential building contract (Sherbourne project located in downtown Toronto) for $172-million. The following day, the share price rallied 5 per cent on high volume with over 741,000 shares traded, well above its three-month daily average trading volume of approximately 240,000 shares.
After the market closes on Nov. 9, the company will be releasing its third-quarter earnings results. The consensus revenue, EBITDA, and earnings per share estimates are $632-million, $26.4-million, and 23 cents, respectively. Management will be hosting an earnings call on Nov. 10 at 10 a.m. ET.
Dividend policy
The company pays its shareholders a monthly dividend of 3.25 cents per share, or 39 cents per share yearly, equating to a current annualized dividend yield of 3.75 per cent.
The company has maintained its dividend at this level since 2017. The company never cancelled a single dividend payment despite uncertainties arising from the coronavirus pandemic.
On the second-quarter earnings call, chief financial officer Wayne Gingrich commented on the prospects of a future dividend increase, “The dividend has remained a very important part of our total shareholder return strategy. But, I think until the pandemic subsides, I don’t think you’re going to see any movement in the dividend until we can kind of say the pandemic is behind us, and then we’ll evaluate things at that point in time.”
Analysts’ recommendations
This small-cap stock with a market capitalization of $558-million is well covered by the Street. There company has a unanimous buy recommendation from nine analysts.
The firms providing research coverage on the company are: ATB Capital Markets, Canaccord Genuity, CIBC World Markets, iA Capital Markets, Laurentian Bank, National Bank Financial, Raymond James, Stifel Canada, and TD Securities.
Revised recommendations
Earlier in the week, CIBC’s Jacob Bout increased his target price to $12 from $11.
Last month, iA Capital Markets’ Naji Baydoun and TD’s Mike Tupholme both raised their target prices by 50 cents to $12.
Financial forecasts
Steady earnings growth is anticipated.
The consensus EBITDA estimates are $105-million in 2021, $115-million in 2022, and $123-million in 2023. The Street is forecasting earnings per share of 90 cents in 2021, $1.02 in 2022, and $1.09 in 2023.
Earnings forecast have trended higher for 2021. To illustrate, four months ago, the Street was forecasting EBITDA of $99.5-million in 2021 and $113-million in 2022. The consensus earnings per share estimates were 82 cents in 2021 and $1.04 in 2022.
Valuation
According to Bloomberg, the stock is trading at an enterprise value-to-EBITDA multiple of 5.2 times the 2022 consensus estimate, below its five-year historical average of 5.6 times. On a price-to-earnings basis, the stock is trading at a P/E multiple of 10.2 times the 2022 consensus estimate, below its five-year historical average multiple of 11.7 times.
The average 12-month target price is $12.14, implying the share price has 17 per cent upside potential over the next year. Individual target prices are: two at $11.50, $11.75, four at $12, $13, and $13.50 (from Raymond James’ Frederic Bastien).
Aecon Group Inc. (ARE-T), its small-cap industry peer, is trading at an EV/EBITDA of 5 times and at a P/E multiple of 15.2 times.
Insider transaction activity
Year-to-date, there has not been any trading activity in the public market reported by insiders.
Chart watch
Between mid-2016 and 2020, the share price was in a downtrend, making lower highs and lower lows.
However, 2021 has been a turnaround year for the stock. Year-to-date, the share price is up 30 per cent, outperforming the S&P/TSX Small Cap Industrials sector, which is up 14 per cent, as well as the S&P/TSX Small Cap Index that has rallied 22 per cent.
In terms of key technical resistance and support levels, there is a ceiling of resistance around $12. After that, there is major resistance around $14. Looking at the downside, the share price has strong technical support around $9, near its 200-day moving average (at $9.12). Failing that, there is support around $8.