Analyst comments National Bank’s Maxim Sytchev thought the conference call with analysts that followed Stantec Inc.’s (STN-T) quarterly earnings release on Tuesday displayed “confident body language” from the Edmonton-based engineering firm’s management, resulting in view that “visibility is good and tariffs are likely a non-event while M&A optionality is solid.”
“Protectionist political rhetoric is not weighing on the outlook,” he added. “Stantec’s overall revenue exposure to U.S. Federal funding is in the 5-per-cent range, while exposure to the more scrutinized programs such as USAID is minimal. Organic growth in the U.S. backlog was almost up 10 per cent year-over-year, and momentum remains broad-based. IIJA funding continues to flow almost entirely without interruption, and delays/cancellations have been minimal (unsurprisingly, EV-related). The administration’s drive towards deregulation could prove to be an incremental positive with the pace of project approvals speeding up, while exposure to sectors most likely to be affected by tariffs is also minimal.
“Water business continues to benefit from thematic tailwinds; Energy & Resources segment is rebounding. The UK’s AMP 8 program is set to officially begin in April and the £104-billion capital program represents a massive 75-per-cent jump over AMP 7. Stantec has already been awarded early-phase consulting/design work and top line momentum is expected to ramp up significantly. The Energy & Resources segment also saw a rebound as new projects ramped up and comps were more manageable and the positive momentum is expected to continue for the remainder of the year, split evenly between opportunities in the power and mining space. The Buildings sector is also seeing broad-based momentum in healthcare, civic, education, data centres and semis.”
Shares of Stantec jumped 10 per cent on Tuesday after it reported quarterly revenue of $1.478-billion, up 19 per cent year-over-year and above the $1.426-billion estimate on the Street. Adjusted earnings per share of $1.11 was 11 cents higher than the consensus forecast, driven by double-digit organic revenue growth in the United States. The company also announced a 7-per-cent dividend increase
In a research note earlier in the day, Mr. Sytchev said he thought the company’s shares had further “room to run.”
“Sentiment on the group has been dampened as investors are trying to assess whether DOGE-like initiatives and generally slower macro growth could be impacting the space afterseveral years of robust growth,” he said. “Recall that STN’s exposure to U.S. Federal is only 5 per cent and the company’s guide certainly implies there is more than enough growth to go around. With an under-levered capital structure of only 1.2 times net debt to EBITDA and a relatively long time since a sizable deal was executed, we believe STN is closer than others to capital deployment, if the right opportunity presents itself. STN is our preferred vehicle to play the consulting space at the moment given attractive valuation and solid execution. Shares are up 9 per cent thus far [Tuesday] and we see further upside ahead given strong visibility for revenue and earnings growth as well as an opportunity for significant multiple expansion (shares trade at a 6 times turn P/E discount to WSP on 2026 estimates).”
With modest adjustments to his forecast to reflect the company’s formal guidance, Mr. Sytchev raised his target for its shares to $143 from $140, reaffirming an “outperform” rating. The average on the Street is $140.
“Given the consistency of results and prescriptive three-year targets outlined at the company’s Investor Day in December 2023, our 2025 forecasts were alreadydirectionally aligned with management’s 2025 guidance earlier [Tuesday] morning,” he explained. “As such, our adjustments largely involve fine-tuning to reflect the most recent quarter and are not structural in nature. That said, given the under-levered balance sheet, we believe M&A could provide incremental upside later in the year.”
Elsewhere, Raymond James’ Frederic Bastien upgraded Stantec to “outperform” from “market perform” with a $140 target, up from $130.
“Our decision to downgrade STN on valuation last August played out well,” said Mr. Bastien. “In the six-plus months that followed, Stantec’s 4-per-cent advance has materially lagged the respective gains of 20 per cent and 35 percent posted by its Canadian peers, WSP Global and AtkinsRalis (even after yesterday’s impressive 10-per-cent bounce). But with organic revenue growth reaccelerating, the setup for M&A particularly favourable, and the new U.S. administration’s priorities unlikely to upset the industry’s strong secular tailwinds, it is time for us to support STN again. We are moving back to an Outperform recommendation.”
Others making target adjustments include:
* Desjardins Securities’ Benoit Poirier to $148 from $138 with a “buy” rating.
“Despite [Tuesday’s] run-up in the shares, we view STN as poised to outperform its peers over the short term in light of its now best-in-industry balance sheet (following recent deals at WSP and ATRL), increased confidence in its insulation from U.S. budget cuts, highly visible growth posture for 2025 (secured by a strong backlog of work over the next 13 months) and underperformance/valuation catch-up (shares up only 6.0 per cent over the last 12 months vs 21.1 per cent for WSP, 63.6 per cent for ATRL and 17.7 per cent for the S&P/TSX),” he said.
* RBC’s Sabahat Khan to $138 from $128 with an “outperform” rating.
“Stantec reported Q4 results and 2025 guidance ahead of consensus. Overall, the 2025 guide points to another year of good organic growth + margin improvement (with potential for upside from future M&A) and puts the company well on track to achieve the targets laid out in the 2024-2026 Strategic Plan. The guide also helps alleviate some of the recent investor concerns related to Stantec’s U.S. exposure (given headlines related to potential federal spending cuts),” said Mr. Khan.
* TD Cowen’s Michael Tupholme to $145 from $139 with a “buy” rating.
“While Q4/24 EBITDA was only slightly above consensus and 2025 EBITDA guidance was essentially in line, both Q4/24 adj. EPS and 2025 adj. EPS guidance were notably above consensus. Further, STN’s Q4/24 results exhibited solid growth, backlog reached a new record, and 2025 guidance implies another strong year. Overall, we see the results and guidance as supportive of our constructive stance on STN,” said Mr. Tupholme.
* Scotia’s Jonathan Goldman to $141 from $129 with a “sector outperform” rating.
“Nothing like a 9-per-cent organic print (10 per cent in the U.S.) on equally elevated comps to dispel any concerns around an industry slowdown and skew growth expectations above the midpoint for 2025,” said Mr. Goldman. “We had been fielding lots of inbounds about slower end-market activity and potential federal funding cuts. Stantec in particular was subject to higher scrutiny given U.S. public exposure (despite only 5 per cent of U.S. revenues coming from federal) and moderating growth rates in 3Q. The reacceleration of U.S. organic growth in conjunction with the 7-per-cent sequential backlog build (in a seasonally weak q) indicates continued momentum and that generational infra needs remain the overarching driver of the outlook.”
* Stifel’s Ian Gillies to $144 from $135 with a “buy” rating.
“One of the simple investment philosophies we have for the engineering firms in our coverage is to own the stock that has the longest passage of time since a sizable acquisition. Acquisitions for engineering firms tend to create positive share price reactions and relative outperformance. Of the three engineering firms in our coverage, Stantec appears to be next up to execute M&A since WSP acquired Power in the fall and AtkinsRealis acquired David Evans in February 2025. On top of the M&A setup, we continue to like the fundamentals (7.0 per cent plus organic growth and margin expansion), in combination with a reasonable 2026E P/E of 20.8 times (peer group 17.0 times) given M&A prospects,” said Mr. Gillies.
* ATB Capital Markets’ Chris Murray to $135 from $125 with a “sector perform” rating.
“STN delivered better-than-expected results and remains positioned to capitalize on strong demand conditions across its core markets and potential M&A activity given moderate leverage levels. However, we continue to see current valuations adequately reflecting the Company’s growth outlook, keeping us neutral on the shares,” said Mr. Murray.
* Canaccord Genuity’s Yuri Lynk to $138 from $135 with a “buy” rating.
“By combining an organic growth and margin improvement focus with a disciplined acquisition program, Stantec has become one of better compounders in our industrials coverage. With initial 2025 adjusted EPS growth guidance between 16 per cent and 19 per cent (after putting up 20-per-cent growth in 2024 and 17 per cent in 2023), Stantec is one of the fastest growing engineering consultants in North America. Keep in mind, acquisitions could be incremental to these numbers with management noting its pipeline is very strong. Despite these positives, Stantec’s valuation is not overly demanding,” said Mr. Lynk.
* CIBC’s Krista Friesen to $139 from $134 with an “outperformer” rating.