Should You Buy SNC-Lavalin Group Inc. (TSX:SNC) Stock Ahead of Earnings?

SNC-Lavalin Group Inc. (TSX:SNC) stock has rebounded marginally from February lows, but it is still a risky bet right now.

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SNC-Lavalin (TSX:SNC) has been thrust into the Canadian consciousness in 2019 due to the central role it has played in one of the biggest political scandals in recent memory. A combination of bad press and a massive Q4 loss have severely damaged investor sentiment. Shares had dropped 24.3% in 2019 as of close on April 16.

Back in early February, I’d recommended SNC-Lavalin as a contrarian pick after the stock hit a 52-week low of $33.30. SNC-Lavalin stock has climbed over the two-month period, but the slight gain is not enough to celebrate. Investors who bought low are counting on a rebound in its core business. Is a big bounce-back in the cards?

SNC-Lavalin released its fourth-quarter and full-year results for 2018 on February 22. The company slashed its dividend by 65% and reported a Q4 2018 loss of $1.6 billion. This drops its quarterly dividend payment to $0.10 per share compared to the original $0.287 per share payment. SNC-Lavalin suffered from problems in its Chile-based business and cited major struggles in its mining and metallurgy and oil and gas segments.

The geopolitical crisis that erupted between Canada and Saudi Arabia in 2018 has jeopardized future contracts. It is easy to pile on SNC-Lavalin right now, but the company can squeeze out of its current crisis. There have been some positives to report in recent weeks.

Until a conviction comes down, SNC-Lavalin will face no contract bidding restrictions in Canada. The company will net $3.25 billion after selling a partial interest in the 407 ETR highway. SNC-Lavalin will retain a 6.76% stake in the 407, which has emerged as an attractive cash cow since its launch in 1997. It raked in over $1.2 billion in revenue in 2017.

In April a SNC-Lavalin joint venture secured a contract valued at more than $1 billion to decommission three nuclear reactors at a power plant in New York. The contract bolsters the company’s nuclear portfolio, and the contracts could add up to an estimated $500 million in revenues over the next eight to 10 years.

SNC-Lavalin is expected to release its first-quarter results for fiscal 2019 in early May. Right now, the stock is still trading at the low end of its 52-week range. In fact, it is still hovering around a 10-year low. Its once solid dividend is now just above a 1% yield. SNC stock dropped into technically oversold territory in January and February. Shares bounced back marginally in late February, but its performance has been underwhelming since then.

As of close on April 16, SNC stock had an RSI of 49. This puts it in neutral territory as we anxiously await its first-quarter results.

Should you buy SNC-Lavalin today?

Investors who bought the dip in February may have enjoyed some middling short-term gains, but most are looking for big growth down the line. SNC-Lavalin remains a speculative buy ahead of its first-quarter report as the company faces a lot of uncertainty.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned.

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