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Here's Why You Should Retain Stantec (STN) in Your Portfolio
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Stantec, Inc. (STN - Free Report) remains committed to its 2019 three-year strategic plan focused on client-centric growth. This plan, which is centered on excellence, innovation, people, and growth, experienced a one-year delay in achieving its financial targets due to pandemic-related lockdowns and is now targeting completion by 2023.
The company has beaten the Zacks Consensus Estimate in two of the last four quarters and matched on the remaining two occasions, the average surprise being 4.7%. For third-quarter 2023, revenues are expected to register a 4.2% rise, the consensus mark of which is currently pegged at $926.79 million. The consensus estimate of third-quarter earnings is pegged at 72 cents per share, which indicates growth of 7.5% from the year-ago reported figure.
Factors in Favor
Stantec has consistently demonstrated its commitment to rewarding shareholders through a combination of dividend payments and share repurchases. In 2022, the company distributed $78.2 million in dividends and repurchased 1.08 billion shares for $65.3 million. Similarly, in 2021, it allocated $72.3 million for dividends and repurchased 939.5 million shares for $50.7 million.
In 2020, Stantec disbursed $68 million in dividends and conducted share repurchases of 2.05 billion, amounting to $78.3 million. These shareholder-friendly actions underscore Stantec's dedication to enhancing shareholder value and signify confidence in the strength of its business.
Stantec's growth strategy heavily relies on acquisitions, which enable it to diversify its services, expand its presence in various regions, and bolster the workforce. Moreover, these acquisitions have been a positive driver for the company's revenue growth and operating cash flow. In 2022, the company successfully executed two tuck-in acquisitions, which align with its strategy. The first acquisition was of Barton Willmore, a UK-based planning and design consulting firm with 300 employees. Barton Willmore plays a vital role in various sectors, including residential, logistics, retail, infrastructure, energy, higher education, and urban regeneration, serving both public and private clients.
The second acquisition was of L2P, a Philadelphia-based firm specializing in architecture, interior design, and planning, employing 40 professionals. L2P is recognized as a trusted advisor in markets such as science and technology, commercial workplaces, higher education, residential, and hospitality. These acquisitions contribute to Stantec's strategic growth initiatives.
Stantec’s current ratio at the end of second-quarter 2023 was 1.47, higher than the year-ago figure of 1.37. Increasing current ratio indicates that the company is not likely to face any issues meeting its short-term debt obligations.
Risks
Interest expenses for the second quarter came in at $22.3 million, up 44.8% from the year-ago reported figure. Interest expenses increased 17.2% in the first quarter. Rising interest expenses are likely to pressurize the bottom line of the company.
Zacks Rank and Stocks to Consider
STN currently carries a Zacks Rank #3 (Hold).
The following better-ranked stocks from the Business Services sector are worth consideration:
Verisk Analytics (VRSK - Free Report) beat the Zacks Consensus Estimate in three of the last four quarters and matched on one instance, with an average surprise of 9.9% The consensus mark for 2023 revenues is pegged at $2.66 billion, suggesting a decrease of 8.2% from the year-ago figure. The consensus estimate for 2023 earnings is pegged at $5.72 per share, indicating a 14% rise from the year-ago figure. VRSK currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Automatic Data (ADP - Free Report) currently has a Zacks Rank of 2. It outpaced the Zacks Consensus Estimate in all trailing four quarters, the average surprise being 3.1%. The consensus estimate for fiscal 2023 revenues and earnings implies growth of 6.3% and 11.1%, respectively.
Broadridge (BR - Free Report) currently carries a Zacks Rank of 2. It surpassed the Zacks Consensus Estimate in two of the trailing four quarters, missed once and matched on one instance, the average surprise being 0.5%. The consensus estimate for fiscal 2024 revenues and earnings suggests growth of 7.2% and 8.8%, respectively.
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Here's Why You Should Retain Stantec (STN) in Your Portfolio
Stantec, Inc. (STN - Free Report) remains committed to its 2019 three-year strategic plan focused on client-centric growth. This plan, which is centered on excellence, innovation, people, and growth, experienced a one-year delay in achieving its financial targets due to pandemic-related lockdowns and is now targeting completion by 2023.
The company has beaten the Zacks Consensus Estimate in two of the last four quarters and matched on the remaining two occasions, the average surprise being 4.7%. For third-quarter 2023, revenues are expected to register a 4.2% rise, the consensus mark of which is currently pegged at $926.79 million. The consensus estimate of third-quarter earnings is pegged at 72 cents per share, which indicates growth of 7.5% from the year-ago reported figure.
Factors in Favor
Stantec has consistently demonstrated its commitment to rewarding shareholders through a combination of dividend payments and share repurchases. In 2022, the company distributed $78.2 million in dividends and repurchased 1.08 billion shares for $65.3 million. Similarly, in 2021, it allocated $72.3 million for dividends and repurchased 939.5 million shares for $50.7 million.
In 2020, Stantec disbursed $68 million in dividends and conducted share repurchases of 2.05 billion, amounting to $78.3 million. These shareholder-friendly actions underscore Stantec's dedication to enhancing shareholder value and signify confidence in the strength of its business.
Stantec Inc. Revenue (TTM)
Stantec Inc. revenue-ttm | Stantec Inc. Quote
Stantec's growth strategy heavily relies on acquisitions, which enable it to diversify its services, expand its presence in various regions, and bolster the workforce. Moreover, these acquisitions have been a positive driver for the company's revenue growth and operating cash flow. In 2022, the company successfully executed two tuck-in acquisitions, which align with its strategy. The first acquisition was of Barton Willmore, a UK-based planning and design consulting firm with 300 employees. Barton Willmore plays a vital role in various sectors, including residential, logistics, retail, infrastructure, energy, higher education, and urban regeneration, serving both public and private clients.
The second acquisition was of L2P, a Philadelphia-based firm specializing in architecture, interior design, and planning, employing 40 professionals. L2P is recognized as a trusted advisor in markets such as science and technology, commercial workplaces, higher education, residential, and hospitality. These acquisitions contribute to Stantec's strategic growth initiatives.
Stantec’s current ratio at the end of second-quarter 2023 was 1.47, higher than the year-ago figure of 1.37. Increasing current ratio indicates that the company is not likely to face any issues meeting its short-term debt obligations.
Risks
Interest expenses for the second quarter came in at $22.3 million, up 44.8% from the year-ago reported figure. Interest expenses increased 17.2% in the first quarter. Rising interest expenses are likely to pressurize the bottom line of the company.
Zacks Rank and Stocks to Consider
STN currently carries a Zacks Rank #3 (Hold).
The following better-ranked stocks from the Business Services sector are worth consideration:
Verisk Analytics (VRSK - Free Report) beat the Zacks Consensus Estimate in three of the last four quarters and matched on one instance, with an average surprise of 9.9% The consensus mark for 2023 revenues is pegged at $2.66 billion, suggesting a decrease of 8.2% from the year-ago figure. The consensus estimate for 2023 earnings is pegged at $5.72 per share, indicating a 14% rise from the year-ago figure. VRSK currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Automatic Data (ADP - Free Report) currently has a Zacks Rank of 2. It outpaced the Zacks Consensus Estimate in all trailing four quarters, the average surprise being 3.1%. The consensus estimate for fiscal 2023 revenues and earnings implies growth of 6.3% and 11.1%, respectively.
Broadridge (BR - Free Report) currently carries a Zacks Rank of 2. It surpassed the Zacks Consensus Estimate in two of the trailing four quarters, missed once and matched on one instance, the average surprise being 0.5%. The consensus estimate for fiscal 2024 revenues and earnings suggests growth of 7.2% and 8.8%, respectively.