WSP Global Inc. (WSP.TO)

(Market Call Minute.) All the Canadian construction companies and engineering companies are probably Buys. North America and the world needs infrastructure to be replaced.

This has a very strong backlog. Thinks they are going to grow at the top end of their guidance. There is a stronger economy now with a GDP of 3.6. There is need for infrastructure spending globally. He models 22% earnings per share growth. Good balance sheet. A little pricey relative to its peers, but below its five-year average. Dividend yield of 2.9%. (Analysts’ price target of $54.50.)

This has had a fair record of peaking out at about 2X its BV, and is currently trading at about 1.6. He can give an upside to about $62 based on its current earnings, but unless there is any earnings acceleration, there is nothing absolutely beyond that, because at that point, both the FMV and the technical condition would run out of gas.

A large company with almost 36,000 employees and 500 offices in 40 countries. 36% payout ratio. They are forecasting unchanged earnings at $.65. Growth margins grew from last year from 17.8% to 18.8%. Year-over-year cash flow was up 53%. Feels all infrastructure supporting companies will end up doing well. Dividend yield of 2.9%. (Analysts’ price target is $54.50.)

He likes the engineering space because they will benefit from infrastructure spending. They are breaking out to all time highs. This is a bullish thing for the stock. Forward earnings estimates make this not look that expensive. Stay with it until we start to break trend, moving below $43. (Analysts’ target $51.50). He does not like the risk/reward and so does not like it. He does not like it short term. You can stick with it if the trend continues, but there is not a lot of upside potential.

WSP-T vs. BIP.UN-T. He would buy BIP.UN-T today. They have a track of record making good acquisitions. The underlying business of WSP-T is not going to generate business that is as stable. You will have mid-single digit dividend growth with BIP.UN-T.

There are many reasons why you might want to look at this play. They just reported and earnings were a little bit soft because they were doing quite a bit of cost containment. You end up getting a global company with 500 locations, 34,000 employees. It really plays into this idea of infrastructure build, which we keep hearing about from the Trudeau government and he thinks something is going to come out of this, and the infrastructure project discussion out of the US as well. This is attractive here.

This is global infrastructure. He sees 11% EPS growth over the next couple of years. Trading a little bit cheaper than its five-year average, which is hard to find in this market right now. They have a very solid dividend of 3.58%. Low payout ratio. Very strong balance sheet. They like to grow by acquisition, which is very important. Currently making an acquisition in the UK which he likes.

They announced the acquisition of a UK company yesterday. They are big in public infrastructure. When they report their Q3 results there will be a currency impact on earnings, but he likes it and owns it and is buying it.

Caller had 15 year time horizon. Equities should provide the best rate of return over that time. Infrastructure building area is going to be a positive. It has a good dividend yield. You can’t predict management over 15 years, but management is doing all the right things right now.

Over the last few years, all the stimulus we have seen has been monetary stimulus. That is great for asset prices and is good for the 1% who happen to have assets. What we have not seen globally is “fiscal stimulus”. That is what often creates jobs. A hot topic right now is that globally; countries appear to be getting ready for fiscal stimulus after the US election. Thinks we are seeing an improvement in construction and engineering companies in a run up to the expectations that we are going to see more spending in this area. This company looks attractive.

He is not in this area right now. He used to own SNC-Lavalin (SNC-T), but sold it in the mid-$40. There is a lot of money flowing in infrastructure. The stocks are kind of pricey, which is why he is hesitant to recommend any of those shares right now. You have to be careful. These are cyclical businesses and if things don’t come to fruition, they are overpriced.

This is an engineering company with a global footprint. He likes the valuation. This plays into the theme of low interest rates and government spending. Thinks there is going to be a lot of government spending in the next 1-1.5 years, and this company will be bidding on a lot of contracts. Dividend yield of 3.47%.

This just had a very good quarter. Showed good organic growth. This is not that exposed to commodities and materials because it really is global.

He likes this. It has pulled back a little on some UK concerns. About 12%-14% of their business is UK. They had to walk away from a UK acquisition they were going to make, which was mildly accretive. He still sees it growing at 9% compounded annually over the next couple of years. Trading at 17X, so it is not cheap, but its 5-year average is around 22X. Very good balance sheet. Dividend yield of 3.8%.