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On Wednesday, Stantec Inc . (NYSE:STN:CN) (NYSE: STN) received an upgraded stock rating from Raymond (NSE:RYMD) James from Market Perform to Outperform, accompanied by a price target increase to Cdn$140.00, up from the previous Cdn$130.00. The upgrade comes after a period of underperformance relative to its Canadian peers, with Stantec (TSX:STN)’s shares advancing only 4% in the past six months, compared to the 20% and 35% gains seen by WSP Global and AtkinsReális, respectively. According to InvestingPro data, Stantec has shown impressive momentum recently, with a 7.17% return in the past week, and is currently trading near its 52-week high of $88.42. The company’s current market valuation suggests it’s slightly above its Fair Value, based on comprehensive analysis available through InvestingPro’s exclusive research reports.
The analyst at Raymond James cited several reasons for the positive shift in Stantec’s outlook. One of the key factors is the acceleration of organic revenue growth, which is supported by InvestingPro data showing a robust 15.8% revenue growth in the last twelve months and an impressive gross profit margin of 54.47%. Additionally, the current market conditions are considered particularly favorable for mergers and acquisitions, which could benefit Stantec moving forward, particularly given its strong financial health score of GOOD according to InvestingPro’s comprehensive analysis.
The new U.S. administration’s policies are also expected to be a boon for the industry, with no anticipated disruptions to the strong secular tailwinds that have been propelling the sector. These factors have contributed to Raymond James’ decision to support Stantec with a higher rating and an increased price target. This positive outlook is further reinforced by InvestingPro’s analysis, which reveals 13 additional key insights about Stantec’s performance and potential, available exclusively to subscribers.
In the analyst’s words, "Our decision to downgrade STN on valuation last August played out well. In the six-plus months that followed, Stantec’s 4% advance has materially lagged the respective gains of 20% and 35% posted by its Canadian peers, WSP Global and AtkinsReális (even after yesterday’s impressive 10% bounce). But with organic revenue growth reaccelerating, the setup for M&A particularly favorable, and the new US administration’s priorities unlikely to upset the industry’s strong secular tailwinds, it is time for us to support STN again."
The upgrade of Stantec’s stock rating to Outperform and the raise in the price target to C$140 from C$130 by Raymond James indicates renewed confidence in the company’s potential for growth and market performance.
In other recent news, Stantec Inc. has received an updated outlook from BMO Capital Markets, which raised its price target for the company to $145, up from the previous $138, while maintaining an Outperform rating. This adjustment comes after Stantec’s strong performance in 2024, with expectations for continued momentum into 2025. BMO analysts have expressed confidence in Stantec’s ability to potentially surpass financial projections, driven by growth in its base operations and strategic mergers and acquisitions. The analysts noted that despite a recent increase in Stantec’s share price, there remains a valuation gap between Stantec and its peer, WSP Global Inc. The updated price target reflects upward revisions in estimates and adjustments in BMO’s valuation base year. BMO analysts believe that the momentum from 2024 is expected to carry over into 2025, presenting opportunities for Stantec to exceed projections. This positive outlook suggests that Stantec’s performance could lead to a favorable reassessment by investors and analysts.
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