Aecon (Construction) updated October 18, 2022

Our report on Aecon Group is updated and rated Weak Sell / Hold at $9.96. Possibly it should be rated Sell but I am reluctant to rate it Sell at the low share price. The company enjoys growing revenue but faces a number of headwinds. Most notably cost over-runs on four major projects. They hope to collect some extra fees from the customers on those but may not be successful. It’s quite disappointing that they refer to these project’s as “legacy” projects from 2018 and earlier. It’s true that this was under a different CEO. But that does not absolve management of responsibility. And they are still taking the risk of doing mostly fixed price contracts although they are trying to reduce their exposure to those.

This company undertakes huge projects but it seems to be a low profit business. I find it bizarre that profits are consistently higher for putting a can of soup on a shelf (grocers) than for constructing a huge bridge. The company is trying to lower it risks and improve profits but it has been a tough industry.

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