Canada is about to embark on a massive construction boom. That boom is set to reshape and supercharge the economy over the next decade. The impact this will have, especially on certain infrastructure stocks and by extension, investors, is massive.
There are currently more than 500 energy, mineral and core infrastructure projects pending investment decisions. When those projects are greenlit, they could lead to a whopping $1.1 trillion cumulative growth in GDP over the next decade.
Even better, those projects are outside of the provincial list of projects. That other list includes new roads, schools, and public facilities, among others. That will keep demand for larger-scale infrastructure projects in demand for years.
Two engineering giants are set to be the primary beneficiaries of those projects. Let’s look at both of them.
Source: Getty Images
Meet AtkinsRéalis
The first of the two infrastructure stocks to note is AtkinsRéalis Group (TSX:ATRL). The Montreal-based company is the successor to the old SNC-Lavalin name. Today, the firm provides a host of professional services catering to design, engineering and project management services for infrastructure and energy assets around the world.
In Canada, AtkinsRéalis is the largest construction company by revenue. The company boasts offices in over 50 countries and operations in over 100 countries around the world.
Those operations include a massive, diversified backlog of projects that are supported by growing demand across the globe. More importantly, those future projects represent a pipeline of future revenue potential for the company.
AtkinsRéalis also has a significant footprint in nuclear energy. The company owns nuclear intellectual property and has worked in several nuclear reactor-related projects.
In recent years, AtkinsRéalis has moved away from legacy, lump-sum, fixed-price projects that led to losses. Instead, the company is now focusing on recurring lower-risk fee-based work.
Turning to results, AtkinsRéalis last reported results for the third fiscal quarter last month. In that quarter, AtkinsRéalis reported revenue of $2.8 billion, reflecting a solid 15% increase over the same period last year.
Overall, the company reported earnings of $146 million, reflecting a 41% year-over-year change.
In short, AtkinsRéalis is uniquely positioned as one of the infrastructure stocks set to benefit from an engineering boom in Canada.
As of the time of writing, AtkinsRéalis has posted a 20% year-to-date gain.
WSP Global
Another top option for investors looking at infrastructure stocks to buy is Montreal-based WSP Global (TSX:WSP). WSP has quietly grown in recent years to become one of the largest global engineering firms with over 200 offices across the U.S.
The company also boasts operations in dozens of countries around the world, including key engineering infrastructure hubs such as China, Germany, and the UAE.
In fact, just this month, WSP announced an agreement to acquire U.S.-based engineering and consulting firm TRC Companies Inc. That deal is valued at US$3.3 billion, and will pole vault the company into position as the largest engineering and design firm in the U.S.
WSP’s focus is on transportation, buildings, water, environmental services, and power/energy infrastructure.
Despite that global footprint, most of WSP’s revenues come from Canada and the U.S. This puts the company in a prime position for any expected GDP uplift tied to Canada’s upcoming mega-projects.
As of the time of writing, WSP’s stock price has remained relatively flat, down less than 1% over the trailing 12-month period.
Buy these infrastructure stocks before ground breaks
Both AtkinsRéalis and WSP stand to benefit significantly from Canada’s expected infrastructure boom. If the federal government moves ahead with just a fraction of the over 500 major infrastructure and resource projects in that backlog, demand for engineering services from both companies will remain strong for years.
Even better, that’s without factoring in provincial plans, such as Quebec’s $164 billion 10-year program, which could add tens of billions in potential contracts.
For longer-term investors, a smaller position in one or both of these infrastructure stocks is warranted as part of any larger, well-diversified portfolio.
