North American Construction Group Ltd. NOA has struck gold with its MacKellar Group, clinching a remarkable five-year contract extension from a prominent metallurgical coal producer for a Queensland-based mine in Australia.
The extension sees the contract’s end date stretched from June 6, 2025, to June 30, 2030, solidifying NOA’s contractual backlog with committed minimum hours. Projections estimate rental scopes at a substantial $100 million annually, painting a lucrative picture with a total value touching $500 million.
To fulfill contract terms, the company will acquire two additional loading units and a service truck, incurring an anticipated expense of $20 to $25 million. These acquisitions are slated for the final quarter of 2024, elevating the site’s dedicated fleet to around 70 heavy equipment units.
Back in October 2023, NACG sealed the deal to acquire MacKellar Group at an expected total consideration of $395 million, solidifying its position in the market.
Stock Performance and Future Outlook
NOA’s share prices have soared, witnessing an impressive 23.1% surge over the past three months, though lagging marginally behind the Building Products – Heavy Construction industry’s robust growth of 36.7%.
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North American Construction Group offers a range of services encompassing equipment maintenance, mining, and heavy construction in key markets such as Canada, the United States, and Australia. Its offering includes constructability reviews, design-build construction, project management, and equipment maintenance services.
Earnings estimate for NOA in 2024 has escalated to $3.27 per share from $3.22 within the past week, projecting a robust 47.3% year-over-year growth trajectory.
Analysis and Market Comparisons
Currently holding a Zacks Rank #3 (Hold), NOA positions itself amidst a mixed bag of recent financial performances in the construction sector.
MasTec, Inc. MTZ has impressed with its fourth-quarter 2023 results, surpassing earnings and revenue expectations, driven by solid contributions from its Oil and Gas segment. This positive momentum has positioned MTZ for a record-breaking revenue and adjusted EBITDA performance in 2024.
Sterling Infrastructure, Inc. STRL reported a mixed bag of results in the same period, with earnings exceeding estimates while revenues fell short. The strategic focus on higher margin segments has been instrumental in STRL’s growth story.
Dycom Industries Inc. DY faced setbacks in its fourth-quarter fiscal 2024 performance, with both revenues and earnings missing estimates. Despite revenue growth, earnings were on a downward trajectory year-over-year.
Investors, therefore, are in for a rollercoaster ride with some companies forging ahead while others navigate through challenges in the construction landscape.
