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01/11 11:05
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals strong financial performance with raised EBITDA margin guidance, record backlog, and consistent organic growth in key markets like water. The integration of acquisitions is progressing well, and no negative impact is expected from Thames Water's issues. Despite some management opacity and reduced 2023 growth guidance, the overall sentiment is positive, supported by strategic M&A activity and optimism in U.S. growth. The lack of market cap data limits precise prediction, but the positive factors suggest a likely 2% to 8% stock price increase.
Net Revenue $1.6 billion, up 6.9% year-over-year, primarily driven by 4.8% organic growth.
Energy & Resources Organic Growth High single-digit organic growth, driven by a major hydropower dam project in the Southwest.
Water Organic Growth 12.4% organic growth, driven by large public sector water supply and wastewater treatment projects.
Adjusted EBITDA Grew by 15% with an enhanced margin of 17.8%, reflecting lower admin and marketing expenses as a percentage of net revenue.
Adjusted EPS Increased over 21% to $1.36, compared to Q2 2024.
U.S. Net Revenue Increased by 5.7%, supported by organic growth of 4.4%, driven by demand in mission-critical, science and technology, and civic sectors.
Canada Net Revenue Grew by 6.2%, underpinned completely by organic growth, with over 30% organic growth in water and double-digit growth in Energy & Resources.
Global Business Net Revenue Grew by 10.5%, with 4.3% organic growth, 3.6% acquisition growth, and positive foreign exchange impacts.
Gross Revenue Approximately $2 billion, with net revenue of $1.6 billion, an increase of 6.9% compared to Q2 2024.
Project Margins Remained at 54.2% as a percentage of net revenue, in line with expectations.
Year-to-Date Operating Cash Flows Up 100% compared to 2024, from $117 million to $235 million, reflecting strong revenue growth and operational performance.
Net Debt to Adjusted EBITDA Ratio 1.1x, remaining well within the internal target range of 1 to 2x.
Contract Backlog $7.9 billion, reflecting approximately 12 months of work, with a 10% year-over-year growth driven by 9% organic growth.
Acquisition of Page: Stantec closed the acquisition of Page, a U.S.-based architecture and engineering firm, bolstering services in health care, advanced manufacturing, data centers, academic science and technology, and civic markets.
Acquisition of Cosgroves: Acquired Cosgroves, a 90-person firm in New Zealand, expanding buildings engineering capabilities.
Acquisition of Ryan Hanley: Acquired Ryan Hanley, enhancing offerings in the Irish water sector.
U.S. Market Growth: Net revenue increased by 5.7% in Q2, driven by demand in mission-critical, science and technology, and civic sectors.
Canadian Market Growth: Net revenue grew by 6.2%, with over 30% organic growth in water and double-digit growth in Energy & Resources.
Global Market Growth: Net revenue grew by 10.5%, with double-digit organic growth in water across the U.K., Australia, and New Zealand, and in Energy & Resources in Chile and Peru.
Revenue Growth: Net revenue reached $1.6 billion in Q2, up 6.9% year-over-year, driven by 4.8% organic growth.
Adjusted EBITDA Margin: Improved to 17.8%, reflecting lower admin and marketing expenses.
Backlog: Contract backlog stood at $7.9 billion, reflecting 12 months of work and 10% year-over-year growth.
Increased 2025 Guidance: Net revenue growth guidance raised to 10%-12% from 7%-10%, with adjusted EBITDA margin expected to reach 17%-17.4%.
Focus on Macro Trends: Strategic focus on aging infrastructure, data centers, energy security, water and wastewater treatment, health care, and reshoring.
Regulatory Approvals: The acquisition of Page required various regulatory approvals, which could pose challenges in future acquisitions if regulatory environments become more stringent.
U.S. Administration Policy Shifts: Significant shifts in U.S. policy, funding priorities, tariffs, and regulatory frameworks could impact the company's operations and growth in the U.S. market.
Australian Business Retraction: The Australian business experienced a retraction in buildings operations, which could signal challenges in maintaining growth in this region.
High Burn Rates in Water Business: High burn rates in the Water business could strain resources and impact profitability if not managed effectively.
Economic and Market Conditions: Economic uncertainties and market conditions, such as changes in public infrastructure spending and private investments, could affect demand for the company's services.
Integration of Acquisitions: The integration of newly acquired companies like Page, Cosgroves, and Ryan Hanley could pose operational and strategic challenges, especially with a growing workforce of over 34,000 employees.
Credit and Financing Risks: While recent financing transactions were successful, reliance on credit facilities and debt instruments could expose the company to risks if market conditions or credit ratings change.
Net Revenue Growth: Stantec has increased its 2025 net revenue growth guidance to 10%-12%, up from the previous 7%-10%.
Organic Growth: The company expects mid- to high single-digit organic growth across its businesses, with Canada and global operations maintaining this range. U.S. organic growth is expected to accelerate in the second half of the year, with a moderated outlook to mid-single digits.
Adjusted EBITDA Margin: The adjusted EBITDA margin guidance has been increased to 17%-17.4%, up from 16.7%-17.3%, reflecting strong project execution and cost management.
Adjusted EPS Growth: Adjusted EPS growth is now expected to be 18.5%-21.5% compared to 2024, up from the previous guidance of 16%-19%.
Adjusted ROIC: The company expects adjusted ROIC to exceed 12.5%.
Backlog: The contract backlog stands at $7.9 billion, representing approximately 12 months of work, with a 9% organic growth year-over-year. U.S. organic backlog is up 9.8% year-over-year.
Regional Growth Trends: Canada and global operations are expected to maintain mid- to high single-digit organic growth. The U.S. is anticipated to see organic growth acceleration in the second half of 2025.
Sector-Specific Growth: Macro trends such as aging infrastructure, data centers, energy security, water and wastewater treatment, health care, and reshoring are expected to continue driving business growth.
The selected topic was not discussed during the call.
The earnings call summary and Q&A indicate a positive outlook with increased guidance on revenue, EBITDA margins, and EPS growth. The company is optimistic about organic growth, driven by strong demand in key sectors and regions. Despite some uncertainties, management's focus on strategic growth, robust M&A pipeline, and positive cash flow performance bolster confidence. However, lack of specific guidance on some metrics and reliance on external factors like government funding introduce minor uncertainties, keeping the sentiment from being 'strong positive.'
The earnings call reveals strong financial performance with raised EBITDA margin guidance, record backlog, and consistent organic growth in key markets like water. The integration of acquisitions is progressing well, and no negative impact is expected from Thames Water's issues. Despite some management opacity and reduced 2023 growth guidance, the overall sentiment is positive, supported by strategic M&A activity and optimism in U.S. growth. The lack of market cap data limits precise prediction, but the positive factors suggest a likely 2% to 8% stock price increase.
The earnings call highlighted strong backlog growth, robust performance in key sectors, and positive sentiment in the Q&A. Despite not raising guidance, management showed confidence in achieving targets. The absence of major negative concerns and the optimistic outlook across various markets suggest a positive sentiment. The lack of market cap information limits precise prediction, but overall indicators point to a positive stock reaction.
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