NACG (NOA) Gets Contract Extension in Canadian Oil Sands

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North American Construction Group Ltd. or NACGNOA has received a three-year contract extension from a major earthworks client for work in Canada's oil sands. This contract extension takes the existing December 2020 expiration date to December 2023.

Meanwhile, NACG has secured a five-year contract through 2023 for earthworks services at the customer's base mine, and sees the value of this backlog at approximately $750 million.

NACG, a heavy construction and mining services provider in Canada, has recently acquired all assets related to the Contract Mining business of Aecon Group Inc., a Canadian construction and infrastructure development company. Aecon's Contract Mining business enables overburden removal and provides environmental reclamation services through a fleet of earth-moving equipment, mainly in the oil sands in Fort McMurray, AL. This acquisition has boosted NACG's fleet that includes heavy earth-moving assets, lighter construction assets, support equipment, maintenance facilities along with existing contractual commitments.

Now, the company believes that the increased equipment fleet will be fully utilized and help to maintain impressive growth trajectory for more years to come.

Shares of NACG have gained 108.9% against its industry 's fall of 24.9% in the past year. The company's price performance is backed by an impressive earnings and revenue performance over the past three quarters.

Notably, in the first nine months of 2018, its revenues of $279.1 million increased 32.6% from the prior-year period. Gross margins in the said period grew 510 basis points (bps) from a year ago. Also, operating margin surged 390 bps year over year during the said period. The company is progressing well with its three-year organic growth plan that targets minimum 15% compound growth in revenues and EBITDA over the said period. The plan requires NACG to generate production-related recurring service volumes in the company's core oil sands market, together with the addition of value-creating services.

Zacks Rank & Stocks to Consider

Currently, NACG carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the Zacks Construction sector include Comfort Systems USA, Inc. FIX , Great Lakes Dredge & Dock Corporation GLDD and EMCOR Group, Inc. EME . While Comfort Systems and Great Lakes Dredge & Dock sport a Zacks Rank #1 (Strong Buy), EMCOR carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Comfort Systems has an expected long-term earnings growth rate of 10%.

Great Lakes Dredge & Dock has an expected earnings growth rate of 111.1% for the current year.

EMCOR's long-term earnings growth rate is pegged at 15%.

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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 Nasdaq, Inc.

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

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