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1. Company Snapshot

1.a. Company Description

Aecon Group Inc., together with its subsidiaries, provide construction and infrastructure development services to private and public sector clients in Canada, the United States, and internationally.It operates through two segments, Construction and Concessions.The Construction segment focuses primarily on the civil infrastructure, urban transportation systems, nuclear power infrastructure, utility infrastructure, and conventional industrial infrastructure market sectors.


The Concessions segment engages in the development, building, construction, financing, and operation of construction projects by way of public-private partnership contract structures.The company was formerly known as Prefac Concrete Co. Ltd.and changed its name to Aecon Group Inc.


in June 2001.Aecon Group Inc.was founded in 1877 and is headquartered in Toronto, Canada.

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1.b. Last Insights on ARE

Aecon Group Inc.'s recent performance was negatively impacted by weak Q4 2024 results, which led to downgrades from Stifel GMP and lower price targets from TD Securities and CIBC Capital Markets. The company's revenue of $4.2 billion was lower than expected, and its backlog of $6.7 billion at December 31, 2024, did not offset the disappointment. Additionally, the absence of share buyback activity has not provided a boost to the stock.

1.c. Company Highlights

2. Aecon's Q3 2025 Earnings: Record Revenue and Backlog

Aecon Group Inc. reported a robust Q3 2025, with revenue reaching a record $1.5 billion, up 20% from the same period in 2024. Adjusted EBITDA was $93 million, and operating profit was $61 million. Excluding legacy project losses, adjusted EBITDA was $114 million. The company's earnings per share (EPS) came in at $0.53, significantly beating estimates of $0.307. The company's financial performance was bolstered by its Construction segment, which saw revenue growth across all sectors, with a 25% increase on an as-adjusted basis.

Publication Date: Nov -23

📋 Highlights
  • Revenue Growth:: Q3 2025 revenue hit $1.5 billion, a 20% increase from Q3 2024, driven by strong Construction segment performance (25% as-adjusted growth).
  • Backlog Expansion:: Record backlog of $10.8 billion, with $1.6 billion in new contract awards, underpinning 2025-2026 revenue expectations.
  • Margin Challenges:: Construction segment trailing normalized EBITDA margin fell to 6.3% (-50 bps), citing project transitions and execution phase shifts.
  • Nuclear Sector Momentum:: U.S. nuclear expansion with 15-state presence, including a $125M SMR project for Energy Northwest, and 1,300+ employees.
  • Capital Discipline:: $341,000 shares repurchased under NCIB; $1B credit facility with $294M drawn, reflecting financial flexibility amid legacy project risks.

Segment Performance

The Construction segment reported adjusted EBITDA of $88 million and operating profit of $70 million. The Concessions segment reported revenue of $2 million and adjusted EBITDA of $15 million. Aecon's nuclear sector continues to perform well, with a strong presence in Canada and the US. The company was recently selected by Energy Northwest to work on a small modular reactor project in the US, further solidifying its position in the market.

Growth Prospects

Aecon expects revenue growth in 2025 and beyond, driven by its record backlog of $10.8 billion and strong bid pipeline. The company aims to improve profitability and margin predictability, with a focus on completing its legacy projects and pursuing fair and reasonable settlement agreements with clients. With a $1 billion committed revolving credit facility, Aecon is well-positioned to capitalize on growth opportunities.

Valuation

With a P/E Ratio of 64.47 and an EV/EBITDA ratio of -144.33, Aecon's valuation appears to be stretched. However, the company's strong growth prospects and improving profitability may justify the premium. The company's ROE of 2.68% and ROIC of 2.65% indicate a relatively low return on equity and invested capital, respectively. Analysts estimate next year's revenue growth at 5.3%, which may help to drive the stock's performance.

Outlook

Aecon's growth sectors, including nuclear and utilities, have strong margins, and the company is allocating capital to high-performing groups using a return on capital employed model. The company's partnership with Kiewit is expanding nicely, providing predictability for future successes. With a strong executive team and a diversified portfolio, Aecon is well-positioned to benefit from the growing demand in the power sector.

3. NewsRoom

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CIBC Says Ontario and First Nation Agreement For an All-Weather Road Will Speed Access to the Ring of Fire

Dec -02

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3 TSX Stocks Trading At Estimated Discounts Up To 43.7%

Dec -02

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Insider Actions Highlight Undervalued Small Caps In Global For December 2025

Dec -02

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4Refuel Hosts Webinar: Fuelling the Shift – Renewable Diesel’s Role in Canada’s Low-Carbon Transition

Nov -27

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Aecon Group Inc.'s (TSE:ARE) Stock Going Strong But Fundamentals Look Weak: What Implications Could This Have On The Stock?

Nov -26

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Additional Considerations Required While Assessing Aecon Group's (TSE:ARE) Strong Earnings

Nov -06

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Aecon Group And 2 Other Stocks On The TSX That May Be Trading Below Fair Value Estimates

Nov -03

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Aecon Utilities agrees to acquire high-voltage testing, commissioning and metering solutions contractor KPC

Nov -03

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (3.03%)

6. Segments

Construction

Expected Growth: 3%

Aecon Group Inc.'s construction segment growth is driven by increasing infrastructure spending, urbanization, and government investments in transportation and energy projects. Additionally, the company's strategic partnerships, diversified service offerings, and strong backlog of projects contribute to its growth momentum.

Concessions

Expected Growth: 5%

Aecon Group Inc.'s concessions segment growth is driven by increasing infrastructure spending, government investments in public-private partnerships, and a growing demand for sustainable and renewable energy projects. Additionally, the company's strategic partnerships, expanding presence in the transportation sector, and focus on digitalization and innovation also contribute to its growth.

7. Detailed Products

Construction

Aecon Group Inc. provides construction services for infrastructure projects, including roads, highways, bridges, and buildings.

Urban Transportation

Aecon offers urban transportation solutions, including light rail transit, subway systems, and bus rapid transit.

Nuclear

Aecon provides nuclear services, including nuclear power plant construction, maintenance, and decommissioning.

Energy

Aecon offers energy solutions, including oil and gas infrastructure, transmission lines, and renewable energy projects.

Mining

Aecon provides mining services, including mine development, operation, and maintenance.

Water and Wastewater

Aecon offers water and wastewater solutions, including treatment plant construction, pipeline installation, and water management systems.

Concessions

Aecon provides concession services, including public-private partnerships, operations, and maintenance.

8. Aecon Group Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Aecon Group Inc. operates in the construction industry, which has a moderate threat of substitutes. While there are alternative construction methods and materials, they are not significantly cheaper or better, limiting the threat of substitutes.

Bargaining Power Of Customers

Aecon Group Inc. has a diverse customer base, including government agencies and private companies. The bargaining power of customers is low due to the complexity and customization of construction projects.

Bargaining Power Of Suppliers

Aecon Group Inc. relies on various suppliers for materials and equipment. While suppliers have some bargaining power, Aecon's scale and diversification mitigate this risk.

Threat Of New Entrants

The construction industry has high barriers to entry, including significant capital requirements and regulatory hurdles. This limits the threat of new entrants.

Intensity Of Rivalry

The construction industry is highly competitive, with many established players. Aecon Group Inc. faces intense rivalry from other construction companies, which can lead to pricing pressure and reduced margins.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 21.84%
Debt Cost 9.88%
Equity Weight 78.16%
Equity Cost 9.88%
WACC 9.88%
Leverage 27.95%

11. Quality Control: Aecon Group Inc. passed 4 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

29.82$

Current Price

29.82$

Potential

-0.00%

Expected Cash-Flows