WSP Global holds steady on earnings and presents sunny financial forecast

MONTREAL — WSP Global sees a lucrative horizon despite fallout from the pandemic, with an updated guidance predicting strong earnings comparable to its pre-COVID-19 expectations.

The outlook, which was suspended after the outbreak, projects net revenues of between $6.7 billion and $7 billion in 2020, with adjusted earnings of at least $1 billion — roughly five per cent below previous guidance

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The fresh forecast comes after a quarter where revenues nudged downward but the backlog grew five per cent year over year and profits remained flat in spite of interruptions sparked by the coronavirus.

A five-per-cent drop in net revenue stemmed mainly from hurdles in Canada and the United Kingdom, CEO Alexandre L'Heureux said on a conference call with analysts Thursday.

In Canada the depressed oil and gas industry hit WSP's market sectors, though the company derives only about five per cent of its revenues from the power and energy industry. The pandemic also prompted construction sites shutdowns.

"In the U.K., the pandemic just proved to be too much for an economy that had already entered 2020 in a weakened position due to the uncertain political and business environment brought forward by Brexit, leading to a particularly hard-hit private sector," L'Heureux said.

"The downturn in these two countries explains most of the top-line contraction in this quarter."

To its detriment, the Montreal-based company has less exposure to public contracts than rivals SNC-Lavalin Group Inc. and Stantec Inc., with about one-third of WSP's revenues in Canada coming from government-funded projects, according to Laurentian Bank Securities analyst Mona Nazir.

"Historically when private sector investment has been weak, governments tend to increase their capital investments," Nazir said. Nonetheless, "all companies in our coverage universe will likely benefit" from a spike in public sector work, she added.

WSP won several big contracts last year, including for Montreal's next massive infrastructure project — repairing the 51-year-old Louis-Hippolyte-La Fontaine Tunnel that connects the island with the South Shore.

WSP partially offset its shrinking income stream with cost-containment measures such as remote work and travel restrictions.

The engineering firm, whose market value of $9.25 billion now more than doubles that of competitor SNC-Lavalin, reported net earnings of $88.3 million or 83 cents per share in the three months ended June 30 on revenue of $2.2 billion.

This story by The Canadian Press was first published Aug. 5, 2020.

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

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