Stantec (STN), based in Edmonton, Alberta, has exposure to a wide range of infrastructure and mining businesses—positioning it to benefit from increased stimulus spending and the booming precious metals market, suggests Mike Larson, editor of Safe Money Report.
It’s one of the world’s top 10 project design, management, and consulting firms. It provides architecture, environmental, geotechnical engineering, transportation, and wastewater services to a wide range of government and private customers.
Recent projects include a cancer research building at the University of California, San Francisco, the Genale-Dawa 3 hydropower facility in Ethiopia the and the Cerro Corona mine in Peru.
Stantec has even worked on the Kenmore Crossing traffic and pedestrian redesign effort near the campus of my alma mater, Boston University.
In 2019, infrastructure-related work (roads, rail, bridges, etc.) accounted for the largest chunk of revenue at 29%. Water-treatment and transport-related projects provided another 20% of its sales, while mining and energy work clocked in with 14%. The U.S. represented 52% of revenue, with Canada next at 30%. Only 18% came from other global sources.
We can pretty much expect near-term numbers to stink, given the COVID-19 related economic downturn. Second quarter results will be released in early August, and management recently withdrew its guidance for the second half of the year given all the uncertainty.
But Stantec has made money in all 65 years it’s been in operation. It’s reducing executive salaries and discretionary spending to cope with the near-term challenges.
And there are several reasons to think the future looks brighter, given its specific business lines: It has leverage to any increase in infrastructure stimulus spending we get in response to the downturn, especially here in North America.
Its mining-related work should pick up as more companies look to capitalize on booming precious metals prices. It will likely benefit from the increased focus on environmental sustainability and increased health care and government spending to fight the outbreak.
Finally, it should get tagged for redesign work to make things like office buildings safer in a post-pandemic world. Throw in the indicated yield and the recent Weiss Ratings upgrade to “Buy” and I think the stock makes a nice Bedrock Income Portfolio addition.
