What Should Investors Watch in Aecon Stock’s Earnings Report?

Aecon (TSX:ARE) stock has earnings coming out this week, and after disappointing fourth-quarter results, this is what investors should watch.

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Aecon Group (TSX:ARE) earnings are due out this week, and investors have already demonstrated a bit of excitement for the stock on the TSX today. Shares are up about 3% in the last week, and yet the company still seems to trade at a valuable 8.04 times earnings. This compares the company’s share price relative to its earnings. Furthermore, it could mean that Aecon stock offers value for today’s investors.

Now, with earnings due, let’s look at what investors should watch for during Aecon stock’s earnings report.

About Aecon

To really understand the company and what to consider when looking at earnings, let’s first look at what Aecon stock does in the first place. Aecon stock is one of Canada’s largest construction companies, providing a range of services to both public and private sector clients. 

Aecon provides a wide range of construction and infrastructure services, including civil construction, building construction, infrastructure development, project management, and maintenance services. The company has expertise in various construction disciplines, such as heavy civil, transportation, utilities, and industrial. 

Aecon has been involved in numerous high-profile projects across Canada and internationally. These projects encompass infrastructure development, transportation systems, energy facilities, mining projects, and commercial buildings. Examples of projects Aecon has been involved in include highways, bridges, transit systems, airports, nuclear power plants, and oil and gas facilities.

Influencing factors

Then there are the influencing factors that could have hit the company’s share price. If we look at Aecon stock over the last five years, there were certainly a few factors that could have affected the company’s share price.

For instance, the COVID-19 pandemic impacted Aecon Group in several ways, though the effects lessened over time. Government-imposed lockdowns and restrictions led to the temporary slowing or suspension of many Aecon projects. Due to the uncertainty, Aecon withdrew its financial outlook for 2020.

What’s more, throughout the pandemic, the company was supported by newly appointed chief executive officer and president Jean-Louis Servranck. Coming on board in 2018, he was immediately hit with the challenge of the pandemic. And yet, he seems to have led the company through perhaps one of its toughest times.

Servranck could, therefore, be behind some of the biggest changes the company has seen over the last few years — some of which could reflect more or less growth in the coming earnings report.

What to watch

Aecon stock has improved net profit margins over the last few years, rising from 0.6% in 2018 to 3.5% in 2023. This suggests better financial health and investor confidence. Aecon stock also experienced a significant increase in earnings in 2023, exceeding its five-year average growth rate. This is likely due to successful projects and cost-cutting measures.

As for its next quarterly report, let’s take a quick look at the last few reports to see where we should see momentum. Aecon stock reported revenue of $1.167 billion in the quarter, with a net profit of $28.2 million. It also hit a backlog of $6.851 billion with new contract awards. By the third quarter, revenue came in at $1.24 billion, net profit rose to $133.4 million, and the backlog was $6.2 billion, showing some are coming online.

However, by the fourth quarter revenue only reported $1.13 billion in revenue and net profit down to just $9.7 million. Furthermore, the backlog fell further to $6.157 billion. So, what should investors watch? We want to see more wins from the company and certainly far more net profit. And that should happen with even more revenue pouring in.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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