North American Construction Group (NOA, Financial) has formalized an agreement to issue $225 million in Senior Unsecured Notes through a private placement. These notes, carrying an interest rate of 7.75% annually, are set to mature on May 1, 2030. They will be priced at $1,000 for every $1,000 of principal amount and interest will be dispensed semi-annually, with the first payment scheduled for November 1, 2025.
The issuance of these notes will be conducted under an indenture agreement with Computershare Trust Company of Canada acting as the trustee. North American Construction plans to leverage the proceeds from this offering to settle existing obligations under its current Credit Agreement and for other corporate needs.
National Bank Financial spearheads this financial maneuver, joined by a consortium of underwriters, including ATB Securities, Scotia Capital, TD Securities, BMO Nesbitt Burns, CIBC World Markets, Canaccord Genuity, Raymond James, and Ventum Financial. The deal is anticipated to close around May 1, 2025, pending standard closing conditions.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 8 analysts, the average target price for North American Construction Group Ltd (NOA, Financial) is $26.14 with a high estimate of $30.29 and a low estimate of $19.47. The average target implies an upside of 71.64% from the current price of $15.23. More detailed estimate data can be found on the North American Construction Group Ltd (NOA) Forecast page.
Based on the consensus recommendation from 8 brokerage firms, North American Construction Group Ltd's (NOA, Financial) average brokerage recommendation is currently 2.0, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for North American Construction Group Ltd (NOA, Financial) in one year is $24.69, suggesting a upside of 62.11% from the current price of $15.23. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the North American Construction Group Ltd (NOA) Summary page.
NOA Key Business Developments
Release Date: March 06, 2025
- Record Annual Revenue: Achieved through strong growth in Australia and highest revenue quarter for MacKellar Group.
- Backlog: Record backlog of $3.5 billion with major contract wins.
- EBITDA: $104 million with a 27.8% margin.
- Gross Profit Margin: Combined gross profit margin of 20% after adjustments.
- Adjusted Earnings Per Share (EPS): $1 for the quarter.
- Free Cash Flow: $50 million driven by strong EBITDA and lighter capital spending.
- Net Debt: Ended the quarter at $856 million, decreased by $26 million.
- Net Debt Leverage: 2.2 times, reduced to 2.0 times after debt conversion.
- Fleet Utilization: Australian fleet at 82%, Canadian fleet improved to 54%.
- 2025 Financial Outlook: Revenue of $1.4 billion to $1.6 billion, adjusted EBITDA of $415 million to $445 million, adjusted EPS of $3.70 to $4.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- North American Construction Group Ltd (NOA, Financial) achieved record annual revenue in 2024, driven by strong growth in Australia.
- The company ended the year with a record backlog of $3.5 billion, including major contract wins in the Canadian oil sands and Australia.
- The MacKellar acquisition in Australia has exceeded expectations, contributing significantly to growth and diversification.
- The company's EBITDA margin improved to 27.8%, reflecting effective operations in both Australia and Canada.
- NOA's bid pipeline remains robust at over $10 billion, with strong demand in Australia and increasing opportunities in Canadian mining projects.
Negative Points
- Canadian fleet utilization remains below target, with Q4 utilization at 54% and a target of 75% by the end of 2025.
- The Oil Sands business experienced a 30% revenue drop last year, with current levels expected to remain consistent.
- The company faced significant shipping and logistics costs for equipment sent to Australia, impacting gross profit margins.
- General and administrative expenses were slightly above the company's target, at 4.5% of reported revenue.
- The first quarter in Australia is typically impacted by weather, affecting operational performance.
