Stantec, Inc. :STN-US: Earnings Analysis: Q3, 2017 By the Numbers : January 3, 2018

Stantec, Inc. reports financial results for the quarter ended September 30, 2017.


  • Summary numbers: Revenues of USD 1,036.54 million, Net Earnings of USD 36.81 million.
  • Gross margins narrowed from 34.60% to 32.69% compared to the same period last year, operating (EBITDA) margins now 8.17% from 9.16%.
  • Change in operating cash flow of -16.00% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
  • Narrowing of operating margins contributed to decline in earnings.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-09-30 2017-06-30 2017-03-31 2016-12-31 2016-09-30
Relevant Numbers (Quarterly)
Revenues (mil) 1036.54 980.71 964.34 614.68 963.91
Revenue Growth (%YOY) 7.54 20.79 75.38 15.53 67.98
Earnings (mil) 36.81 72.61 -43.83 22.03 37.77
Earnings Growth (%YOY) -2.56 342.13 -296.64 16.21 -1.03
Net Margin (%) 3.55 7.4 -4.54 3.58 3.92
EPS 0.32 0.63 -0.39 0.19 0.33
Return on Equity (%) 2.47 5.01 -3.03 1.5 2.6
Return on Assets (%) 4.81 9.38 -5.5 2.76 4.75

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Market Share Versus Profits

Revenues History
Earnings History

Compared to the same period last year, STN-US’s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if STN-US’s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by 5.69% and earnings by -49.31% compared to the previous period.

Earnings Growth Analysis

The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 34.60% to 32.69%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 9.16% to 8.17% in this time frame. For comparison, gross margins were 33.90% and EBITDA margins were 7.75% in the previous period.

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

STN-US’s decline in gross margins were offset by some improvements on the balance sheet. The management of working capital, for example, shows progress. The company’s working capital days are now 33.70 days from 40.30 days for the same period last year. This leads Capital Cube to conclude that the gross margin decline is not altogether bad.

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

STN-US’s year-on-year change in operating cash flow of -16.00% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.


The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 6.13% to 5.63% and (2) one-time items that contributed to a decrease in pretax margins from 5.31% to 5.12%

EBIT Margin History
PreTax Margin History

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Company Profile

Stantec, Inc. is engaged in providing professional consulting services in planning, engineering, architecture, interior design, landscape architecture, surveying, environmental sciences, project management and project economics for infrastructure & facilities projects. It supports its clients through multidiscipline service delivery throughout the project life cycle. Stantec was founded in 1954 and is headquartered in Edmonton, Canada.

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