Murray Wood: Who's hot and who's not
Every Friday, Murray Wood takes a look at the week's news and decides who's hot and who's not. This week's list includes...
MONTREAL — WSP Global Inc. remains largely insulated from tariff fallout and cost-cutting by the U.S. government, but acquisitions at the engineering giant may have to take a back seat amid broader economic uncertainty, says chief executive Alexandre L’Heureux.
“The worst thing that can happen for an M&A environment to be prosperous is to have instability and a lack of visibility into the future,” he told analysts on a conference call Thursday.
“A lot of players are on the sidelines and are waiting for good conditions.”
As it watched and waited, the Montreal-based company racked up a first-quarter profit increase of 14 per cent year-over-year.
It grew its backlog 17 per cent to a record $16.60 billion, despite the U.S. administration’s aversion to spending on big projects hatched in recent years.
The firm also drew on its October purchase of Power Engineers — an American engineering and environmental consulting company with 4,000 employees — to help reach nearly six per cent organic revenue growth in the United States, which accounts for 40 per cent of WSP’s net sales.
L’Heureux said transport and infrastructure, the company’s largest segment, enjoys “minimal exposure at the federal level” south of the border, with clients including state and local governments as well as private customers.
However, those lower-tier governments depend on federal funding for infrastructure investments, and a massive chunk of the US$1 trillion in annual grants they receive from Washington, D.C., is in jeopardy.
U.S. President Donald Trump in January froze all federal payments to local governments before scrapping the memo days later. But agencies are going ahead with funding reviews prompted by an executive order. Last week, the president proposed big budget cuts to domestic agencies.
“I’m not going to sit here telling you that there are no uncertainties. That’s not true. Our clients are — like you, like me — wondering. And, as I said, this is a very fluid environment,” L’Heureux stated.
“Do I feel that it is impacting us directly as a company? The answer is no …. But I don’t have access to the Oval Office.”
For now, plans on both sides of the border seem to be proceeding smoothly.
In January, a WSP-led joint venture secured a $75-million contract to oversee reconstruction of Baltimore’s Francis Scott Key Bridge, which collapsed in March 2024 after a container ship struck it, killing six workers.
In Canada, the City of Montreal retained the company for engineering work to rebuild water and sewer mains, resurface roads and redevelop the vast urban bike network, among other projects over the next three years.
Looking ahead, L’Heureux pointed to the newly elected Liberal government’s infrastructure commitments. Prime Minister Mark Carney has pledged $5 billion for ports, railroads, airports and highways.
Australia marked the only off-note in WSP’s financial results. First-quarter organic revenue shrunk six per cent year-over-year in its Asia Pacific operations as government-funded transportation contracts are not “picking up as fast as we would like,” L’Heureux said.
Even if fears of a worldwide recession are realized, National Bank analyst Maxim Sytchev pointed to history as reason for WSP to hope.
“Western governments historically reached out for (a) Keynesian approach to stimulating the economy,” he said in a note to investors, stressing that 50 per cent of WSP’s clients are public-sector ones.
Meanwhile, worrying global trends may be a boon to big engineering firms.
“Climate events are getting more frequent, (the) need for power is only accelerating, intra- and inter-country migration require more infrastructure where not enough exists, re-shoring / decoupling from China is happening, water scarcity, etc.”
On Thursday, WSP reported net earnings attributable to shareholders of $144.1 million in the three months ended March 29, up from $126.8 million in the same period a year earlier.
Revenue climbed 22 per cent to $4.39 billion in the first quarter from $3.59 billion the year before.
On an adjusted basis, net earnings increased to $1.76 per share from $1.55 per share, beating analysts’ expectations of $1.71 per share, according to financial markets firm LSEG Data & Analytics.
This report by The Canadian Press was first published May 8, 2025.
Companies in this story: (TSX:WSP)
Christopher Reynolds, The Canadian Press
