Aegion Gets $13.4 million Montreal Contract - Analyst Blog

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Aegion Corp. ( AEGN ) declared that its Canadian subsidiary, Insituform Technologies Limited (Insituform Canada) has been awarded a $13.4 million contract from the City of Montreal, Quebec, Canada for the rehabilitation of old pipelines. Aegion's shares gained 1.34% from the news to close at $22.76.

Per the contract, Insituform Canada will rehabilitate up to 130-year old pipelines located mainly in residential areas in municipalities throughout the city. The scope of work entails rehabilitation of around 11 miles of egg-shaped brick pipelines and 10-inch to 42-inch diameter combined sewer system pipelines. Insituform will use its air inversion steam cure installation method which reduces energy usage during installation by approximately 95%. Insituform Canada will also internally reinstate approximately 3,400 service laterals using robotic cutters.

Work on the project will begin immediately and is expected to be completed by May 2015. Insituform plans to add up to three new positions at its Montreal wet out plant for the project.   

For over three decades, Insituform has been a leader in the development and installation of proprietary technologies and services for rehabilitating sewer, water and other underground piping systems without digging or disruption. Over the past 4 years, Insituform Canada has been awarded 9 contracts from the City of Montreal with a total value of around $33 million. The company has already rehabilitated over 16 miles of pipelines throughout the city and its municipalities.

Earlier this month, Aegion lowered its second-quarter and fiscal 2014 guidance at its investor day in New York. The company expects second-quarter earnings of 34-36 cents, lower than the previous guidance of 39 to 41 cents. The guidance was lowered due to a slower ramp-up of project activity in the second quarter and weaker margins for parts of the Energy and Mining segment.

While the Water and Wastewater segment is performing in line with expectations, the Commercial and Structural segment will likely disappoint. On a positive note, the Commercial and Structural segment is expected to pick up steam and perform better in the second half of 2014. Consequently, the guidance for fiscal 2014 earnings per share had been lowered to a range of $1.50 to $1.65 from the previous $1.50 to $1.70 range.

Aegion has set long-term earnings per share growth target of 15%. The company expects to increase its cash flow from operating activities at the same rate of earnings per share growth or higher. The expected earnings per share growth also lays the foundation for an over 100 basis point annual improvement in return on invested capital with the goal of achieving 10-12% in 2017. Conditions in the energy, mining, wastewater pipeline and commercial infrastructure industries remain favorable for Aegion.

Chesterfield, MO-based Aegion is a diversified building and construction company which provides infrastructure protection, proprietary technologies and facilities. It also offers services related to the rehabilitation and improvement of sewer, water, energy and mining piping systems.

Aegion currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include Simpson Manufacturing Co., Inc. ( SSD ), Gibraltar Industries, Inc. ( ROCK ) and United Rentals, Inc. ( URI ). While Simpson Manufacturing and Gibraltar Industries sport a Zacks Rank #1 (Strong Buy), United Rentals holds a Zacks Rank #2 (Buy).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: ROCK , URI , SSD , AEGN

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