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NACG (NOA) Buys Ultra-Class Haul Trucks to Meet Higher Demand

Zacks Equity Research

North American Construction Group Ltd. NOA or NACG has acquired 31 used ultra-class haul trucks from an existing oil sands client. The deal has been signed under a long-term purchase arrangement.

Of the 31 used ultra-class haul trucks, 16 are of 380-ton capacity. These high capacity haul trucks will create a near-term opportunity for the company to reduce the burden of high customer demand. Also, this fleet acquisition will allow NACG to utilize its second-life rebuild expertise in new Acheson maintenance facility in the long term.

NACG is a leading provider of heavy construction and mining services in Canada. The company has served large oil, natural gas and resource companies for more than 60 years. NACG has been pursuing strategic acquisitions in order to boost top-line growth.

On Nov 23, NACG acquired all assets related to the Contract Mining business of Aecon Group Inc. Aecon is a construction and infrastructure development company in Canada. The deal is valued at a purchase price of $199.1 million, subject to customary closing adjustments. Also, the buyout is expected to be accretive to NACG’s EBITDA, free cash flow and earnings by 2019.

Additionally, on Sep 10, it closed a deal to acquire 49% ownership interest in Nuna Logistics Limited and related companies or Nuna. The deal was signed for $42.5 million in cash and is expected to account for nearly 20% of its incremental and diversified revenues.

Meanwhile, in the first nine months of 2018, the company’s revenues came in at $279.1 million, which increased 32.6% from the prior-year period. Also, gross margins grew 510 basis points (bps) and operating margin surged 390 bps in the same period.

Notably, shares of NACG have broadly outperformed its industry as well as the S&P 500 in the past year. The company’s shares have gained 71.4% against its industry’s fall of 30.3% in the said period. The company’s price performance is backed by an impressive earnings and revenue performance over the past three quarters.

Moreover, the Zacks Consensus Estimate for the current year is pegged at 44 cents, reflecting 214.3% year-over-year growth. Also, the consensus estimate for the next year is pegged at $1.14 per share, up 159.1% from the prior-year figure.

Zacks Rank & Stocks to Consider

Currently, NACG carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the Zacks Construction sector include KBR, Inc. KBR, United Rentals, Inc. URI and PGT Innovations, Inc. PGTI, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

KBR surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with the average being 9.2%.

United Rentals has an expected earnings growth rate of 53.5% for 2018.

PGT Innovations has a projected earnings growth rate of 93.4% for the current year.

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