SNC-Lavalin Swings to a Q1 Profit; Shares Pop 15%

Shares of SNC-Lavalin Group Inc (SNC) jumped more than 15% in early trading Friday after the company posted a profit in its third quarter, driven by higher profits in professional services and project management. Founded in 1911, SNC-Lavalin is a fully integrated professional services and project management company with offices worldwide.

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Profit attributable to shareholders amounted to C$73 million in Q1 2021, compared to a loss of nearly C$66 million in Q1 2020.

Net income from continuing operations was C$67.7 million (C$0.39 per share) for the quarter ended March 31, compared to earnings of C$950,000 (C$0.01 per share) a year earlier.

The Quebec engineering firm said earnings included C$61 million (C$0.35 per diluted share) from professional services and project management, compared to earnings of C$21 million (C$0.12 per diluted share) in the same quarter last year.

On an adjusted basis, profit from professional services and project management businesses was C$0.48 per share, up from C$0.35 per share in the prior-year quarter.

Revenue came in at C$1.82 billion in Q1 2021, down from C$1.87 billion in Q1 2020.

SNC Lavalin Group’s President and CEO Ian L. Edwards said, “We had a strong start to the year with a first-quarter in line with our expectations, as our Engineering Services business, which includes the EDPM, Nuclear, and Infrastructure Services segments, delivered another solid quarterly performance. We are seeing a strong pipeline of new work across all of our core geographies, as governments continue investing in new projects.” (See SNC-Lavalin Group Inc stock analysis on TipRanks)

On April 22, RBC Capital analyst Sabahat Khan maintained a Buy rating on SNC with a C$33.00 price target, for 3.8% upside potential.

Last month, the World Bank removed SNC-Lavalin from its blacklist on contract corruption in Bangladesh and Cambodia two years earlier than expected.

Khan said the early removal of sanctions is positive for SNC-Lavalin from a reputation standpoint. “From a financial perspective, revenues that SNC generated from the World Bank and associated entities were immaterial at the time of the settlement in 2013, so we do not expect this announcement to be material from a financial perspective,” he wrote in a research note.

The rest of the Street is optimistic on SNC with a Strong Buy consensus rating based on 6 Buys and 2 Holds. The average analyst price target of C$32.79 implies 3% upside potential from current levels.