Posted on November 28, 2018
North American Construction Group Ltd. or NACG has acquired all assets related to the Contract Mining business of Aecon Group Inc., a Canadian construction and infrastructure development company. The deal is valued at a purchase price of $199.1 million, subject to customary closing adjustments.
Aecon’s Contract Mining business provides overburden removal and environmental reclamation services through a fleet of earth-moving equipment, mainly in the oil sands in Fort McMurray, AL.
The buyout is expected to be accretive to NACG’s EBITDA, free cash flow and earnings by 2019.
Per the deal, Aecon will increase NACG’s annual revenue capability by $220 million. Also, the company anticipates basic earnings per share for 2019 to increase beyond $1.60. This acquisition includes Aecon’s fleet of heavy earth-moving assets, lighter construction assets, support equipment, maintenance facilities along with existing contractual commitments.
NACG is focused on better serving its customers through existing innovations to an expanded fleet, via lowering operating costs on oil-sands mines.
North American Construction Rides on Acquisitions
NACG, a premier provider of heavy construction and mining services in Canada, has been pursuing strategic acquisitions in order to boost top-line growth.
On Sep 10, 2018, the company closed a deal to acquire 49% ownership interest in Nuna Logistics Limited and related companies or Nuna. The deal was signed for $42.5 million in cash and is expected to result in nearly 20% of its incremental and diversified revenues.
Notably, in the first nine months of 2018, the company’s revenues of $279.1 million increased 32.6% from the prior-year period. Gross margins in the said period grew 510 basis points (bps). Also, operating margin surged 390 bps during the said period.
Meanwhile, shares of North American Construction have outperformed its industry so far this year. The company’s shares have gained 81.2% against its industry’s fall of 19.4% in the said period. The company’s price performance is backed by an impressive earnings and revenue performance over the past three quarters.
Zacks Rank & Stocks to Consider
Currently, North American Construction carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Zacks Construction sector include Great Lakes Dredge & Dock Corporation (GLDD – Free Report) , Comfort Systems USA, Inc. (FIX – Free Report) and EMCOR Group, Inc. (EME – Free Report) . While Great Lakes Dredge & Dock and Comfort Systems sport a Zacks Rank #1 (Strong Buy), EMCOR carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Great Lakes Dredge & Dock’s earnings for 2018 are expected to increase 111.1%.
Comfort Systems surpassed the Zacks Consensus Estimates in three of the trailing four quarters, with the average being 16.5%.
EMCOR’s 2018 earnings are expected to grow 20%.
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