Stantec Rise on Q3 Earnings Beats

Zacks

Shares of Stantec Inc. (STN) have increased 5.3% since it reported a 34% year-on-year rise in third quarter earnings to 98 cents per share on Oct 31. The company reported better-than-expected top-line and bottom-line results for third-quarter 2013. The reported figure exceeded the Zacks Consensus Estimate of 78 cents by 25.6%.

Earnings for this professional consulting service were primarily aided by top-line growth and increased activity in the company’s Environment, Industrial as well as Transportation practice areas.

Revenues

Gross revenue jumped 21.3% year over year to $ 559.3 million (CAD 581.2 million) in the reported quarter, beating the Zacks Consensus Estimate of $449 million. Organic revenue growth was 10.1% in the reported quarter.

Stantec’s Environment and Industrial practice areas performed well in the quarter led by a strong oil and gas sector. Moreover, the company received major export pipelines contracts across Canada, which is expected to boost its revenues in upcoming quarters as well.

The company’s Transportation sector received a boost from key acquisitions and contract wins, including a construction contract for designing the Westside Subway Transit Corridor-one of the most regionally significant infrastructure programs in southern California.

Margins                                                       

Gross margins in the quarter remained almost flat at 45.2% compared with 45.6% in the year-ago quarter. The company’s operating profit jumped 34% year over year in the reported quarter. However, the company’s operating profit margin crept up 102 basis points to 10.75% in the quarter.

Stantec also declared a dividend of 16.5 cents per share, which will be paid on Jan 16, 2014, to shareholders of record date Dec 31, 2013.

Stantec currently carries a Zacks Rank #3 (Hold). Some better-placed stocks in the Business Services industry are CoreLogic, Inc. (CLGX), Exponent Inc. (EXPO) and Huron Consulting Group Inc. (HURN) and. While Huron and Exponent both carry a Zacks Rank #2 (Buy), CoreLogic has a Zacks Rank #1 (Strong Buy).

Note: CAD 1 = $0.9624 (period average from Jul 1, 2013 to Sep 30, 2013)

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