Updated Stantec Report

Our report on Stantec is updated with a rating of Buy at CAN $31.33 or U.S. $31.33. Stantec’s earnings declined moderately in 2015 but declined about 30% in Q4. This was due to the down-turn in oil and gas activities and mining activities. And Stantec’s earnings could certainly decline again in Q1 2016. After that it begins to “lap” the quarters where its earnings growth had suffered in 2015. Overall in 2016 the company appears to expect flat revenues from its existing businesses (lower in first part of 2016 with some recovery in later 2016). Additional revenues from acquisitions could lead to modest single digit earnings growth overall in 2016. Longer term Stantec’s long-standing practice of growth by acquisitions should allow a return to double digit earnings growth in 2017. Stantec is a very well managed company and the current lull in earnings and somewhat lower stock price appears to represent a buying opportunity. A reasonable strategy might be to take a modest position or add modestly to an existing position with a view to accumulating more shares if the stock price should decline with Q1 earnings or for other reasons.