SNC-Lavalin (Photo credit: Wikipedia)
SNC : TSX : C$43.01
SNC-Lavalin is one of the leading engineering and construction groups in the world and a major player in the ownership of infrastructure, and in the provision of operations and maintenance services. SNC-Lavalin has offices across Canada and in over 35 other countries around the world, and its 24,000 employees are currently working in some 100 countries. All amounts in C$ unless otherwise noted.
Despite SNC missing Q4/12 expectations and issuing surprisingly weak guidance for 2013, we are maintaining our BUY rating as we see an
attractive reward-to-risk profile. We continue to peg downside potential at $38.00 based on trough EPS (ex. ICI), a trough 9x multiple, $23.00 for
the ICI, and $355 million in fines/penalties. Thus, potential upside to our C$53.00 target (cut from C$55.00) outstrips potential downside 2:1. We
see significant upside potential as margins should normalize in the out years.
At $2.2 billion, Q4/12 revenue (ex. ICI) exceeded our estimate by 12%, with all segments less O&M higher than expected. Negative cost reforecasts
totalling $77 million left EBITDA (ex. ICI) at $51 million. Excluding this, EBITDA (ex. ICI) would have been in line with our $128 million estimate. EPS (ex. ICI) came in at $0.16 vs. our $0.50 estimate.
Management initiated 2013 guidance of 10-15% EPS growth on the $2.04 earned in 2012. At the mid-point, this implies 2013E EPS (ex. ICI) of $1.37. Previously, we expected $1.85 in EPS (ex. ICI) and have taken our estimate down to $1.45 and 2014 to $1.95 from $2.20. Power and
ICI should be strong, H&C weak, while M&M could be the swing factor. Numerous legacy contracts are underperforming, weighing on margin.
The AGM in May is shaping up to be a key potential catalyst for SNC.
Bob Card, CEO, is expected to unveil the strategic plan going forward.
Posted by jackbassteam on March 12, 2013
John Deere 2130 Tractor (Photo credit: Odalaigh)
DE : NYSE :
The Big Green Profit Machine.
Deere saw a 22% increase in its Q1 earnings, driven by better sales in North America. Deere reported a profit of $649.7 million, or $1.65 a share, versus a year-earlier profit of $532.9 million, or $1.30 a share. Total revenue, which includes Deere’s finance unit, grew 10% to $7.42 billion.
Analysts had forecast earnings of $1.40 a share on $6.72 billion in total revenue.
The company’s overall equipment sales in the U.S. and Canada, including construction and forestry equipment, rose 18% during the first quarter from a year earlier. The company now expects to earn $3.3 billion in profit this year, implying earnings per share of $8.45. The company had previously forecast $3.2 billion in profit.
Deere expects equipment sales to rise 6% this year to $35.5 billion, up from 5% previously. Analysts had expected the company to earn $8.37 a share from sales of $35.2 billion.
Posted by jackbassteam on February 15, 2013
Building construction (Photo credit: Toban B.)
HW : NYSE : US$9.34
Headwaters Incorporated is a provider of innovative construction materials for use in the light building products and heavy construction industries.
We maintain our BUY rating as we expect improving construction market trends to help support P&L momentum. With contribution margins of 40%+, we find HW very well positioned to outperform in a housing/construction market recovery.
New residential construction continues to drive improvement in light building products (full impact expected later in ’13 given lagging impact and seasonality), while flyash volumes were softer than expected on weather, outages and lower electricity demand (offset by price).
Guidance gets tweaked up slightly to incorporate Kleer Lumber and improving end-markets (~$110-125M from $100-115M), while not yet factoring a pick up in repair/remodel activity. We do note difficult comps in Q2 given unusually mild conditions in 2012.
Our conservative estimates adjust as follows: F2013 rev/EBITDA/ EPS to $702.6M/$111.3M/$0.19 from $688.0M/$105.6M/$0.09; F2014 to $748.0M/$124.3M/$0.27 from $734.0M/$124.5M/$0.27.
We apply a multiple of 9.6x EV/FY2014 EBITDA (F2014E EBITDA of $124.5M) to reach our $12.00 target.
Volatility in residential construction markets, uncertain flyash regulations/demand and a highly leveraged balance sheet.
Posted by jackbassteam on January 31, 2013
English: The Linamar auto parts factory in Swansea, Wales (Photo credit: Wikipedia)
LNR : TSX : C$21.67
BUY Target: C$29.00
Linamar is a leading industrial manufacturer specializing in machined automotive components (mainly engine, transmission and other driveline
components) and other industrial systems (aerial work platforms and related products, energy product assemblies, agricultural equipment assemblies). The company operates principally from Guelph, Canada but it has growing operations in Europe, the U.S., Mexico and Asia.
All amounts in C$ unless otherwise noted.
Transportation and Industrials — Auto Components
Q3/12: STRONG GROWTH, STRONG
Q3/12: strong growth continues EPS came in at $0.52, above the consensus mean estimate of $0.50 and 34% above the $0.39 in Q3/11.
LNR’s Powertrain/ Drivetrain (P/D) segment posted a 15% increase in EBIT (excluding FX) on a 5.5% increase in sales and nice margin expansion. LNR’s Industrial segment continued to improve, increasing sales by 13% and boosting margins 9.3% to 2.7% excluding FX.
Strong growth outlook
LNR is on track for a $300-350 million increase in new business for P/D, and the Industrial segment is up 65% YTD in 2012. P/D new business
launches are expected to increase a further $450-550 million in 2013. P/D margins have probably topped out for now, but further margin
gains seem likely for the Industrial segment.
Forecast slightly lower, target boosted on valuation period roll forward
We have modestly cut our forecast due to slightly more conservative sales assumptions. However, we still project a strong 16.5% increase in annual EPS from 2012 to 2014.
We continue to recommend BUYing LNR given the 35.3% potential ROR to our one-year target. Our target is based on a relatively average
valuation multiple compared to LNR’s historical valuation range.
LNR provides exposure to an excellent growth story with good operating momentum and attractive sales growth and margin expansion attributes
and an attractive valuation.
Posted by jackbassteam on November 15, 2012