WSP beats earnings expectations, maintains guidance

Dive Brief:

• WSP saw backlog rise 6% in Q1 2022 from last quarter, while revenue jumped 28.8% from last year as the Montreal, Canada-based contractor locked in key infrastructure projects around the globe. Its $2.1 billion ($2.7 billion Canadian) in revenue beat analysts’ expectations by $520 million, according to Seeking Alpha. 
• The company saw net earnings of $73.5 million in the first quarter, or 61 cents per share, up 8.7% year over year, but down 24.5% from last quarter. WSP’s backlog, or jobs won but not started, increased to $8.4 billion from $6.4 billion last year.
• WSP maintained its guidance despite the positive indicators, and in an investor call Thursday CEO and President Alexandre L’Heureux said it’s prudent to keep the financial outlook where it is. L’Heureux said the Q1 results “were robust across our geographies and sectors and ahead of our expectations,” and create a solid foundation for the company’s 2022-2024 strategic cycle.

Dive Insight:

WSP recently won several large projects, including an offshore energy hub in the Adriatic Sea and a hospital redevelopment in Melbourne, Australia. It also landed a contract for the Ontario GO Transit rail expansion (pictured above) — the largest multi-year project that the company has won in Canada — which will be added to its second quarter backlog. 

“Thanks to our strong organic growth, healthy increase in backlog and strong talent attraction, WSP delivered a robust performance in its first quarter,” L’Heureux said during the call. “Today, everything is in place for us to realize the ambitions of our action plan, all in view of becoming the undisputed leader in our industry.”

The company declared a dividend of 37.5 cents per share, which it paid in April. L’Heureux also said it has hired nearly 4,000 workers since the beginning of the year. The company is continuing to focus on green building and technical services, L’Heureux said, adding that the company’s acquisition of environmental consulting firm Golder a year ago was “a great success on all fronts.” 

He said the acquisition has helped WSP grow its climate-related work and meet strong demand for environmental services, in particular in the mining industry. In March, WSP released its inaugural climate risk and opportunities report. 

WSP also landed a unique contract for the largest wastewater treatment plant project in Canada in which the contractor, client and consultant will share responsibility for all elements of the Ontario build’s execution. Many infrastructure builders have been outspoken about the challenges of sprawling public-private partnerships, and L’Heureux said this type of integrated project delivery procurement approach is the future. 

Looking ahead

Analysts on the call probed WSP leaders about the potential impact of inflation. L’Heureux said the company has been taking challenging economic conditions into account in its planning, and he doesn’t expect to change its financial outlook. 

“Inflation is not a concern that has been there only for the last 90 days, I think we were all aware last year that inflation was there and mostly was there to stay, so we certainly tried to prepare with that in mind when we started the year,”  L’Heureux said. “I’m not suggesting that things won’t change in the distant future, but at the moment we are being awarded a lot of great work, both in the public and also in the private sector.”

The company said it is seeing growth across markets, and in its Earth and environment sector in particular. L’Heureux noted the growth of infrastructure investment in the U.S. and in many other countries would be a boon in the years to come.

“WSP has outperformed the market and industrial peers over the past one-, three- and five year periods due to its successful acquisition strategy, which has generated solid growth despite uneven economic conditions,” Edward Jones analyst Matt Arnold wrote in a May 12 investment summary report. “The primary downside risks to our Buy recommendation include negative changes in global political or economic conditions, project delays and potential difficulty integrating future acquisitions.”