Aecon Group: 25% Increase in Revenue; Shares Surge 9%

Aecon Group Inc. (ARE) reported its second-quarter results on July 22 after market close. The construction company revenue and adjusted EBITDA increased significantly from the prior-year quarter. Consequently, shares gained 9% on Friday morning.

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Revenue came in at C$971 million for the quarter ended June 30, an increase of 25% from C$779.4 million last year.

Meanwhile, adjusted EBITDA was C$61.3 million in Q2 2021, an improvement of C$36.9 million from C$24.4 million in Q2 2020. Aecon reported an operating profit of C$34.6 million in the quarter, compared to an operating loss of C$0.8 million a year ago.

The reported backlog as of June 30, 2021, was C$6,524 million, compared to a backlog of C$7,255 million as of June 30, 2020.

Aecon’s President and CEO Jean-Louis Servranckx said, “During the quarter, new awards of nearly $1.6 billion resulted from strong demand for Aecon’s services across Canada in smaller and medium sized projects, and also incorporated a number of multi-year projects in the nuclear, civil operations and urban transportation systems, and industrial sectors – illustrating the diversity of Aecon’s backlog by scale, duration, geography, and sector. Aecon’s overall outlook for 2021 remains positive as construction continues on a number of projects that ramped up in 2019 and 2020, backed by the level of backlog and new awards achieved during the first half of 2021 and the strong demand environment for Aecon’s services going forward, including recurring revenue programs.”

Aecon’s alliance agreements with Enbridge Gas Inc. have been extended until the end of 2023. Those give Aecon additional recurring revenue opportunities in utility operations. (See Aecon Group stock charts on TipRanks)

Earlier this week, Stifel Canada analyst Ian Gillies reiterated a Buy rating on the stock with a C$24.50 price target. This implies 19.4% upside potential.

Overall, consensus on the Street is that ARE is a Moderate Buy based on 5 Buys and 2 Holds. The average Aecon Group price target of C$21.79 implies upside potential of about 6.2% to current levels.