North American Construction sinks to lowest since 2022 after big Q2 miss, guidance cut

[Excavator moving sand in a gravel pit]
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North American Construction Group (NYSE:NOA [https://seekingalpha.com/symbol/NOA]) -24.3% in Thursday's trading to its lowest in nearly three years after Q2 adjusted earnings [https://seekingalpha.com/news/4485018-north-american-construction-group-non-gaap-eps-of-0_02-misses-by-0_51-revenue-of-370_6m-beats] came in much lower than expected and the company lowered its outlook for this year's H2, anticipating softer demand due to increased economic volatility.

Q2 net income fell to C$10.3M, or C$0.33/share, from C$14.5M, or C$0.48/share, in the year-earlier quarter, and revenues rose to C$320.6M from C$276.3M but came in slightly below analyst forecasts.

The construction and mining company said it now expects H2 2025 adjusted EBITDA of C$190M-C$210M, down from previous guidance of C$205M-C$225M, while adjusted EPS forecast at C$1.40-C$1.60, compared with previous guidance of C$1.95-C$2.15, "adjusted to reflect increased near-term costs related to demand volatility and higher maintenance requirements."

In response, TD Cowen downgraded North American Construction to Hold from Buy with a C$21 price target, lowered from C$25, expecting meaningful share price weakness following the Q2 miss and reduced guidance.

"Generally, we are supporters of this name, and our downgrade to Hold feels a bit like capitulation at the bottom, but 2025 will represent two consecutive years of missed guidance, and it is challenging to see positive catalysts that support multiple expansion in the near term," TD Cowen analyst Aaron MacNeil wrote.

ATB Capital cut its rating to Sector Perform from Outperform, citing three key factors for the company's Q2 miss - an unexpected three-week customer driven reduction in oil sands activity, over-reliance on subcontractors in Australia, and a profit impact from the Fargo Moorhead JV project - all weighing on EBITDA growth.

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* Financial information for North American Construction Group [https://seekingalpha.com/symbol/NOA:CA/income-statement]