What happened?
The shares of Aecon Group (TSX: ARE) dived by well more than 10% Wednesday morning to their lowest level since November 2020. While Aecon stock bounced back from its day-low in the afternoon, it was still trading at $15.89 per share with nearly an 8% drop for the day despite an over 200 points gain in the TSX Composite Index.
So what?
Aecon Group is an Etobicoke-based construction and infrastructure company with a market cap of about $1.1 billion. The company generates most of its revenue from its home market, as Canada made up about 97% of its topline numbers in 2021.
Wednesday’s steep losses in Aecon stock came a day after the construction company released its fourth-quarter results on March 1. In the December quarter, its total revenue stood at $1.1 billion — showcasing a minor 1% year-over-year gain but missing Street analysts’ consensus estimates.
To add pessimism, factors including a drop in its gross profit, higher costs, and lower volume in civil operations, urban transportation solutions, and industrial operations affected its bottom line in the last quarter. As a result, Aecon Group’s adjusted earnings in Q4 2021 fell by 64% from a year ago to $0.17 per share — also failing to meet analysts’ expectations of $0.47 per share by a huge margin.
Its latest earnings and revenue miss badly hurt investors’ sentiments — triggering a massive sell-off in Aecon stock on March 2.
Now what?
Notably, Aecon Group has increased its dividends in 10 out of the last 11 years and has an attractive dividend yield of around 4% at the moment. While rising costs and lower volume in multiple segments stole Aecon Group’s profits in the last quarter, its financial performance could improve in 2022 with a strong contract backlog of $6.2 billion at the end of 2021. Also, the company expects its rising recurring revenue programs in the utilities sector and strengthening demand to help it post strong results in the ongoing year.
In its latest earnings report, Aecon’s management highlighted strengthening infrastructure market in Canada and showed confidence that it’s “well positioned to capitalize on this momentum.” Given all these factors indicating improving outlook, long-term dividend investors may consider buying Aecon Group stock on the dip.
