AtkinsRéalis (formerly SNC-Lavalin): Stock of the Week

Here’s why we like SNC-Lavalin’s name change – and the new trajectory of the business.

Andrew Willis 25 September, 2023 | 4:39AM
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Key Takeaways for AtkinsRéalis Investors:

  • The name change comes at an appropriate time as the company sheds costly businesses and SNC-Lavalin’s reputation.
  • We like the move to shed lump-sum turnkey projects amid cost overruns in recent years.
  • AtkinsRéalis is set apart from competitors with its capital businesses, which gives the company a financial interest in large infrastructure projects.


Andrew Willis: SNC-Lavalin, or should I say, AtkinsRéalis (ATRL), recently announced a name change that makes a lot of sense. There’s some substance to it, and investors might want to keep an eye on this stock opportunity.

We haven’t reached the height of SNC stock in 2018, but the trajectory over the past year suggests investors see something beyond the company’s past performance and reputation. The company shed its previous management and is now avoiding costly lump-sum turnkey projects.

Name Change and a Game Change at AtkisRéalis

Equity analyst Krzysztof Smalec says that he is encouraged by the winding down of such projects, as well as the strong revenue growth recently in its SNCL segment, where the company will be focused on higher-margin engineering services, as well as operations and maintenance. And the new strategic direction at AtkinsRéalis still includes existing differentiators from competitors, such as its capital businesses which blurs the line between engineering and investing.

The capital segment at AtkisRéalis helps the company become more involved in all stages of a large infrastructure project, from financing to selling and even retaining an interest after the asset is built. Other engineering competitors lack the broad capabilities required to pull off such a model and it also puts the firm on better footing to capitalize on opportunities in Canada.

Investors considering AtkinsRéalis should keep the no-moat rating for the company in mind, however individual businesses like nuclear projects have moat potential given the switching costs. And investing activities that lead to 30-year concession agreements should lead to a lasting advantage.

For Morningstar, I’m Andrew Willis.


bulls AtkinsRéalis Bulls Say

  • We think that SNC-Lavalin’s nuclear segment has carved a narrow moat based on intangible assets and switching costs. The segment consistently delivers midteens operating margins and has solid growth prospects.
  • SNC-Lavalin’s capital segment differentiates it from many E&C rivals that lack the firm’s broad capabilities.
  • The firm’s portfolio includes attractive assets, including its stake in Highway 407 as well as the EDPM, nuclear, and capital segments.

bears AtkinsRéalis Bears Say

  • Execution issues have resulted in significant charges on lump-sum turnkey projects.
  • Diplomatic tension between Canada and Saudi Arabia has dimmed the oil and gas business' prospects in the Middle East.
  • The company faces a 280 million penalty after pleading guilty to fraud charges related to legacy work in Libya.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
SNC-Lavalin Group Inc58.63 CAD-0.22Rating

About Author

Andrew Willis

Andrew Willis  is Senior Editor at Morningstar Canada. He previously produced content for Fidelity Investments and finance industry events for Euromoney Institutional Investor and has written in the past for Thomson Reuters and CNN. Follow him on Twitter @Andrew_M_Willis.

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