WSP to acquire Wood’s Environment and Infrastructure unit. Buy alert?

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WSP to acquire Wood’s Environment and Infrastructure unit. Buy alert?

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WSP to acquire Wood’s Environment and Infrastructure unit. Buy alert?
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Highlights

  • WSP (TSX: WSP) has agreed to acquire John Wood Group’s Environment and Infrastructure business.
  • WSP stock spiked by five per cent to C$ 146.615 at 9:37 AM EST on June 1 following this development.
  • WSP Global reported revenues of C$ 2.71 billion in Q1 FY2022, up from C$ 2.1 billion in Q1 2021.

WSP Global (TSX: WSP) turned heads on the stock market on Wednesday, June 1, after it announced its plans to acquire John Wood Group Plc’s Environment and Infrastructure (E&I) business. The acquisition deal involves the TSX industrial company paying a total cash consideration of US$ 1.810 billion and is expected to close in Q4 2022.

President and CEO of WSP Global Alexandre L’Heureux said that this acquisition is in line with its Global Strategic Action Plan for 2022-2024 and will expand its capabilities in the environmental sectors.

While delivering WSP Global’s Q1 FY2022 results, Mr L’Heureux stated that the Golder acquisition (completed in April 2021) allowed the company to capitalize on the ‘thriving’ environment sectors.

On that note, let us discuss WSP Global’s financial and stock performance.

WSP Global Inc (TSX: WSP)’s Q1 FY2022 results

WSP Global reported revenues of C$ 2.71 billion in Q1 FY2022, up from that of C$ 2.1 billion in Q1 2021. The construction company also noted a year-over-year (YoY) rise of 26 per cent in its net revenue in the latest quarter, supported by organic growth of 12.7 per cent (including about a 4.5 per cent surge because of more billable days).

The large-cap company said that its backlog increased organically by 15.8 per cent YoY across all divisions and stood at C$ 11 billion as of April 2, 2022.

WSP Global recorded a net profit of C$ 95 million in the first three months of FY2022, higher than C$ 87.9 million a year ago. However, its free cash flows (FCF) notably declined from a positive balance of 85.3 million in Q1 2021 to a negative balance of C$ 185.3 million in the latest quarter.

The C$ 16-billion market cap company will dole out a quarterly dividend of C$ 0.375 per share on July 15.

WSP Global Inc (TSX: WSP)’s Q1 FY2022 results

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WSP Global’s stock performance

Having closed at C$ 139.62 on May 31, WSP stock spiked by five per cent to C$ 146.615 at 9:37 AM EST on Tuesday, June 1. However, WSP stock was almost 26 per cent down from a 52-week high of C$ 187.94 (November 11, 2021).

According to Refinitiv data, WSP’s Relative Strength Index (RSI) also climbed to 45.61 on June 1. WSP Global’s Moving Average Convergence/ Divergence (MACD) indicator also seems to be heading upward towards the zero line.

Bottomline

According to the statement released by WSP Global, it's Global Earth & Environment Consultancy will have about 20,000 experts across the globe. The company believes that the acquisition of Wood’s Environment and Infrastructure (E&I) business will expand its capabilities in the high growth water sector and expand its reach to federal clients and governments.

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Please note, the above content constitutes a very preliminary observation based on the industry, and is of limited scope without any in-depth fundamental valuation or technical analysis. Any interest in stocks or sectors should be thoroughly evaluated taking into consideration the associated risks. 

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