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What Awaits North American Construction (NOA) in Q3 Earnings?

Zacks Equity Research

North American Construction Group Ltd. or NACG NOA is scheduled to release third-quarter 2019 results on Oct 29, after the closing bell.

In the last reported quarter, the company’s earnings and revenues topped the Zacks Consensus Estimate by 3.9% and 7.9%, respectively. It reported second-quarter earnings of 27 cents per share compared with break-even earnings a year ago, aided by significant backlog. Revenues grew by a solid 123% year over year.

Markedly, NACG reported better-than-expected earnings in two of the last four quarters, with the average positive surprise being 4.1%.

How are Estimates Faring?

Let’s take a look at the estimate revision trend in order to get a clear picture of what analysts are thinking about the company prior to the earnings release.

For the quarter to be reported, the Zacks Consensus Estimate for earnings per share has been stable at 23 cents over the past 30 days. This indicates an increase of 475% from 4 cents per share reported in the year-ago quarter. Revenues are expected to be $111.3 million, suggesting a 70.9% increase from the year-ago reported figure of $65.1 million.

North American Construction Group Ltd. Price and EPS Surprise

North American Construction Group Ltd. Price and EPS Surprise

North American Construction Group Ltd. price-eps-surprise | North American Construction Group Ltd. Quote

Factors at Play

NACG is expected to have recorded solid revenue growth in the third quarter, owing to an increase in mine support services, incremental earthworks and construction activity in core oil sands operations. Fleet acquired in fourth-quarter 2018 at three oil sands mine sites, new work at the Fort Hills and Aurora mines, and significant incremental work at the Millennium Mine are likely to have boosted its top line in the to-be-reported quarter. Meanwhile, higher level of heavy civil construction activity at the Kearl mine are also expected to have contributed to growth.

Nuna Logistics — in which NACG owns a stake — is expected to have significantly contributed in the quarter, given its bigger platform and access to fleet/balance sheet post the takeover.

Increased infrastructural spending from federal and provincial governments, large earthwork projects (namely P3, flood diversion and road building), along with development and civil earthworks construction for greenfield and expanding sites are likely to have aided NACG’s third-quarter performance.

Additionally, improved planning and minimal unnecessary downtime, less ad hoc activities on-site related to movement of personnel and equipment, and most importantly, improved scheduling of heavy equipment maintenance are likely to have resulted in margin improvement in the quarter.

Here is What Our Quantitative Model Predicts:

Our proven model does not conclusively predict an earnings beat for NACG this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is 0.00%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: NACG currently has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks Worth a Look

Here are some companies in the Zacks Construction sector, which according to our model have the right combination of elements to post an earnings beat in their respective quarters to be reported.

Floor & Decor Holdings, Inc. FND has an Earnings ESP of +0.78% and a Zacks Rank #3.

Jacobs Engineering Group Inc. JEC has an Earnings ESP of +2.20% and holds a Zacks Rank #2.

Martin Marietta Materials, Inc. MLM has an Earnings ESP of +1.77% and carries a Zacks Rank #2.

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