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WSP Global beats earnings expectations as it locks down large projects

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MONTREAL — WSP Global Inc. secured key project wins across three continents this year, boosting profits and revenue and beating expectations in its first quarter.

The Montreal-based engineering firm locked down contracts tied to Ontario's GO Transit rail expansion, an offshore energy hub off the coast of Italy and a hospital redevelopment in Melbourne, Australia.

The new work helped push WSP's backlog to $11 billion, with organic growth of nearly 16 per cent last quarter compared with a year earlier. Net earnings increased eight per cent and revenues leaped 29 per cent, the company said Thursday.

The rail contract, announced last month, will see WSP take on design and engineering services within a partnership composed of a half-dozen companies working toward "one of the largest regional transit projects in Canadian history," WSP chief executive Alexandre L'Heureux told analysts on a conference call.

The agreement between the six partners and the Metrolinx regional transport agency and Infrastructure Ontario marks phase one of a multibillion-dollar plan to transform the GO rail network from a peak-period commuter service into an all-day one "with a subway like frequency" for the Greater Toronto and Hamilton Area, he said. It also involves acquiring an electric train fleet, electrifying 600 kilometres of track and building 200 kilometres of new track.

Despite the healthy quarter, WSP's stock has tumbled 25 per cent since the start of the year.

"We're not paying too much attention to what's happening to the stock market at the moment," L'Heureux said.

"We are being awarded a lot of great work both in the public and also in the private sector," he stated, saying U.S. President Joe Biden's US$1-trillion infrastructure plan holds promise for government-funded projects starting next year.

"Some peaks and valleys, obviously. But I have to say... if it's not the strongest, it's certainly a very good period for the company."

Analysts largely agreed, with some noting confusion over the ongoing stock drop — WSP's share price edged down by about one per cent or $1.19 on Thursday to close at $134.27.

"We are perplexed by the reaction to one of the best prints ANY public engineering company put out this quarter ... WSP remains one the only engineering firms with the balance sheet and shareholder support to undertake a sizable, yet accretive acquisition in the near-term," Laurentian Bank Securities analyst Troy Sun said in a note to investors.

RBC Dominion Securities Inc. analyst Sabahat Khan attributed the stock decline to "macro concerns" that could hurt engineering and construction firms in the event of a recession, on top of a general market "correction." He stressed that WSP continues to "execute well," driving higher profit margins even as inflation and labour shortages crank up costs.

Once a boutique firm called Genivar, the 63-year-old company has swelled to 56,000 employees from 31,700 at the end of 2014. It has eclipsed SNC-Lavalin Group Inc.'s workforce of roughly 31,000 — down from 50,000 employees three years ago as SNC streamlined into a pure-play engineering firm.

WSP's market value stood at $15.8 billion as of Thursday afternoon compared to its competitor's $4.3-billion valuation.

The firm reported net earnings attributable to shareholders of $95 million or 81 cents per share in the quarter ended April 2 compared with $87.9 million or 77 cents per share in the same period last year.

Revenues rose to $2.71 billion from $2.10 billion a year earlier, beating the average analyst estimate by a third, according to financial data firm Refinitiv.

Adjusted net earnings climbed to $136.4 million or $1.16 per share in the first quarter from $94.2 million or 83 cents per share a year earlier, topping analyst estimates by six cents per share.

This report by The Canadian Press was first published May 12, 2022.

Companies in this story: (TSX:WSP, TSX:SNC)

Christopher Reynolds, The Canadian Press

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