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Tuesday, Raymond (NSE:RYMD) James analysts raised the stock rating for North American Construction Group (NYSE:NOA:CN) (NYSE: NOA) from Outperform to Strong Buy, setting a new price target of Cdn$40.00. The upgrade follows a positive outlook for the company's performance in 2025, with the expectation that it will be one of the best years for the firm.
According to InvestingPro data, the company has demonstrated strong momentum with impressive revenue growth of 35.8% over the last twelve months.
The analysts at Raymond James believe that the issues faced by North American Construction Group in 2024 are now behind them, and they anticipate a strong year ahead. The firm's enduring partnership with Suncor is no longer seen as a concern, and the recent acquisition of the Australian company MacKellar has been showing profitable and consistent growth. The company maintains a GOOD financial health score on InvestingPro, with particularly strong profitability metrics and a consistent dividend payment history spanning 11 consecutive years.
The guidance provided by North American Construction Group for 2025 suggests potential for better-than-expected performance. Furthermore, the analysts point out that the company's valuation is currently at a significant discount, trading at 6.9 times their estimated earnings per share (EPS) for 2025. This is notably lower than the five-year average for similar Canadian and Australian contractors.
In other recent news, North American Construction Group Ltd. has announced an Automatic Share Purchase Plan (ASPP), a mechanism designed to enhance shareholder value by allowing systematic repurchases of shares during blackout periods. The company has also secured a significant civil construction project in Australia, marking a notable expansion of its international footprint. In addition, North American Construction Group has secured a new regional services contract, further strengthening its market position.
InvestingPro's analysis indicates the company's strong financial performance, with a recent record EBITDA of $106 million and a 29% margin, largely attributed to robust growth in Australia and successful joint ventures. The company's Canadian fleet utilization rose to 51% with a projected increase to 60% by year-end.
Furthermore, North American Construction Group Ltd. has been awarded a significant heavy civil construction project, indicating the company's ongoing commitment to expanding its operations. These developments come along with a solid bid pipeline exceeding $10 billion and a pro forma backlog of $3.1 billion, indicating increased activity.
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