Morningstar | SNC-Lavalin Issues Second Profit Warning in Two Weeks; Lowering FVE
We cut our fair value estimate for no-moat engineering and construction firm SNC-Lavalin to CAD 37 from CAD 40 after management issued a second warning in two weeks that 2018 earnings will come in well below consensus estimates. Management now expects its adjusted diluted 2018 EPS to be CAD 1.20-1.35 compared with CAD 3.60-3.85, provided in November 2018, and CAD 2.15-2.30 issued on Jan. 28, 2019.The primary reason for the drastic cut in 2018 EPS is an issue the company uncovered with a project in the mining and metallurgy segment, driven by cost overruns and lower-than-expected recognized revenue for the period, which management expects to have a material adverse impact on 2018 earnings. Management provided an update on the matter, saying that SNC-Lavalin agreed to an accelerated arbitration process with the client, and the firm expects some future recoveries.
Management also issued preliminary 2019 guidance for adjusted diluted EPS of CAD 3.00-3.20. As this is in line with our prior expectations, the newly issued guidance range did not have a material impact on our fair value estimate. We expect to provide an update on Feb. 22, when the company releases more details on its 2018 results and outlook for 2019.
SNC-Lavalin Group is an engineering and construction group, and is engaged in the ownership of infrastructure and in the provision of operations and maintenance services. Co.'s segments are: mining and metallurgy, which provide tailored solutions for projects in the aluminum, gold, copper product sectors, among others; oil and gas, which includes projects for oil and gas and resources companies; power, which includes projects and services in hydro, and nuclear and thermal power generation, among others; infrastructure, which include infrastructure & construction, and operations and maintenance; capital, which invest in equity or subordinated debt into projects for public services.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
We have operations in 27 countries.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.