Why Aecon Stock Fell 11% on Wednesday

Aecon stock (TSX:ARE) fell by as much as 11% on Wednesday as the company reported a huge drop in net income, and analysts cut targets.

Amy Legate-Wolfe

Amy became interested in investing in 2018 after having her first daughter. After receiving a masters degree in journalism from Western University, she became frustrated that the finance industry remained a confusing place for Canadians like her: new parents, millennials, and other young people who needed to understand their finances. Now, Amy focuses on tech companies and renewable energy for growth opportunities, coupling that with long-term investing strategies and equities. She also provides investors with a daily newsletter, Canada Stock Digest, for daily market updates. Before joining Motley Fool Canada, she wrote for major news organizations including HuffPost, CTVNews.ca, and CBC. When she’s not researching investing strategies, Amy’s time is pretty much monopolized by her two wild daughters, but in what little spare time she has she loves to do yoga, go on walks with her dog, and travel with her husband. Follow Amy on LinkedIn and Canada Stock Digest. Favorite Investment Quote: “October: This is one of the particularly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain

Published March 2, 2022 1:57 pm EST

| More on: ARE

Aecon Group (TSX:ARE) shares fell 11% on Wednesday after the company reported weak results for its fourth-quarter. Analysts quickly weighed in on the future of the infrastructure company, downgrading the shares.

What happened

Aecon reported revenue of $4 billion for 2021, with a backlog of $6.2 billion in projects at the end of the year. The company managed to also approve an increase to $0.185 in its quarterly dividend, the tenth increase in the last 11 years.

But the positive news seems to stop there for Aecon stock. While there was strong revenue growth and a large backlog, adjusted EBITDA and operating profit both fell year over year. Net income came down by almost half to $49.7 million from $88 million the year before. Revenue came in at $1.089 billion for the quarter, a 1% year-over-year increase, with adjusted EBITDA of $61.3 million missing expectations near $80 million. Adjusted earnings per share of $0.19 completely missed estimates of around $0.50.

So what

While the company remains positive, analysts believe Aecon stock will now “sector perform” rather than “outperform” within the industry. Omicron already affected the company, and while its Coastal GasLink project is underway, the completion isn’t likely to hit until 2023 and that’s a while to wait for investors. Furthermore, we’re now in the first quarter and given it’s construction, there really isn’t likely to be much major movement.

Analysts cut their targets for Aecon stock to around $18 in early reporting, though the average remains around $21 per share. Still, that sent shares down to $15.80 as of writing.

Now what

There is some cautious optimism from analysts, but investors will have to wait to see strong performance from Aecon. There are lots of projects to look forward to, but supply chains, COVID-19 and other factors continue to affect revenue. Still, there should be some slow but steady recovery for those looking long-term for Aecon stock performance.

Shares were down 8% on Wednesday, trading at $15.80 as of writing.