When governments around the world ramp up public infrastructure spending, investors often look for companies with the scale, expertise, and track record to win those contracts. AtkinsRéalis (TSX:ATRL) has been positioning itself as one of the best on the TSX for that exact moment. Over the past year, it combined record-breaking results with strategic moves that strengthen its balance sheet and expand its capabilities, setting it up for potentially strong growth if the infrastructure boom accelerates.
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First, earnings
The most recent quarter showed exactly how this foundation is paying off. Revenue climbed 15% year over year to $2.7 billion, with particularly impressive gains in its Nuclear segment, which saw a nearly 59% increase to a record $567 million. That growth wasn’t just a blip. It reflects surging demand for clean energy infrastructure and modernization of existing facilities.
Backlog reached an all-time high of $20.9 billion, up 20% since the start of the year, a figure that underscores how much work is already locked in. The Canadian stock’s engineering and project management services are being sought out globally. Yet, its Canadian roots position it well for domestic spending plans, especially with federal and provincial governments signalling more investment in transit, energy, and utilities.
AtkinsRéalis also made one of its most notable moves this year by selling its remaining stake in Highway 407 ETR for $2.6 billion. That deal freed up cash to pay down $900 million in debt, repurchase $765 million worth of shares, and still maintain a strong cash position. The debt reduction improves financial flexibility, while buybacks signal confidence in the Canadian stock’s valuation. Importantly, this bolstered balance sheet gives AtkinsRéalis more room to pursue strategic acquisitions – ones like the recent purchase of a majority stake in David Evans, expanding its U.S. footprint.
Considerations
Over the past year, shares climbed nearly 72%, outpacing many peers in the engineering and construction space. Some of that is due to the market finally recognizing the turnaround from its earlier lump-sum turnkey project struggles. These are now a small part of the business. The shift to higher-margin, recurring revenue services has helped drive a much steadier earnings profile. Adjusted diluted earnings per share (EPS) from professional services and project management jumped 59% in the latest quarter to $0.78. This shows how operational improvements feed through to the bottom line.
There are risks, of course. Public infrastructure spending cycles can be influenced by politics and budget constraints. If governments pull back on capital projects or if inflation erodes margins on long-term contracts, growth could slow. The Canadian stock also trades at a forward price/earnings (P/E) of about 29. This is not cheap and leaves less room for error if results stumble. However, the earnings boost from its nuclear segment and the diversified global project base help mitigate reliance on any single region or sector.
Looking ahead, the Canadian stock raised its outlook for nuclear revenue for the year, now expecting between $2 billion and $2.1 billion. That’s thanks to strong year-to-date performance and a swelling backlog. While it trimmed its engineering services growth forecast slightly due to softer results in some international markets, the core narrative remains one of expansion and opportunity. With an upgraded investment-grade credit rating and a record order book, AtkinsRéalis seems ready to take advantage of any surge in public works spending. Whether in Canada or abroad.
Bottom line
For investors betting on a wave of infrastructure investment to meet climate targets, replace aging assets, and support population growth, this could be one of the most leveraged plays on the TSX. The combination of strong execution, a diversified project pipeline, and a healthier balance sheet makes it a compelling pick for those looking to ride the next big building cycle.
