Little more than a month after it said it could grow its revenues organically this year, Stantec Inc (TSE:STN, Mkt cap 2.92B, P/E 17.47, Div/yield 0.10/1.35, EPS 1.77, Shares 94.26M) has performed something of a U-turn, now stating that it is “clearly impossible” to grow given the dramatic collapse in oil prices, the Financial Post reports.
Speaking at a CIBC investor conference last week, Stantec president and CEO Bob Gomes said the engineering giant is expecting “maybe zero to maybe a small retraction of our organic growth by the end of the year.”
Previously, Stantec had told investors to expect the company’s revenues to grow organically by 2% by the end of 2015. That announcement was surprising due to the fact that a significant decrease in oil prices had served to disrupt the Edmonton-based consulting firm’s energy and resources business – the company’s largest division – prompting it to lay off between 700 and 800 people in Alberta this year.
“With what’s happened in the oil and gas business in the last two months, since the end of the second quarter, it has just made it clearly impossible [to grow] when you do the math,” said Gomes last week.
Gomes was hopeful that new business from Stantec’s buildings and infrastructure division would offset the drop from oil and gas prices, but his latest comments suggests otherwise.
However, the 15,000-strong organisation still anticipates overall revenue growth, having acquired four companies so far this year.
AltaCorp Capital analyst Chris Murray expressed his surprise at the original 2%-growth target, but added that the economy in the U.S. has helped soften the blow of coming up short.
“They also benefit from the fact that, for the first time ever, U.S. revenues now represent the largest percentage of where their revenues originate from,” he said.
Stantec Inc is an Edmonton Alberta based consulting engineering firm. The company provides planning, engineering, architecture, interior design, landscape architecture, surveying, environmental sciences, project management, and project economics. Stantec has three business operating units: Buildings, Energy & Resources, and Infrastructure.
Stantec’s buildings business operating unit consists of services in architecture, buildings engineering, project management, interior design, and functional planning for vertical infrastructure. Its Energy & Resources business operating unit is composed of environmental services, industrial engineering services, project management, and construction management services, primarily for private sector clients. The Infrastructure business operating unit is engaged in the design and engineering services, and also project and construction management.
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