The WSP Global Inc. logo is seen in an undated handout photo. THE CANADIAN PRESS/HO, WSP Global Inc. *MANDATORY CREDIT*

MONTREAL - WSP Global Inc. is riding high after boosting its earnings forecast for the year, buoyed by organic growth as well as recent acquisitions that have boosted revenues.

Along with higher adjusted earnings, the engineering firm said Wednesday it now expects revenues for this year to hit between $10.7 billion and $11 billion, up from a previous outlook of $10 billion to $10.6 billion.

The more optimistic outlook comes after WSP reported that net earnings rose 69 per cent year-over-year in its second quarter, to top $150 million.

The growth occurred across "all our key regions and segments," said chief executive Alexandre L'Heureux on a conference call with analysts.

He highlighted the United States in particular, where a one-fifth increase in contract awards year-to-date has yet to be factored into an already 25 per cent year-over-year boost to WSP's total second-quarter backlog, which stood at a record $14.3 billion.

The U.S. contract wins "reflect a rising need for improved infrastructure and for our expertise, which is a similar trend we see globally," L'Heureux said.

"We are seeing better performance than what we were anticipating at the beginning of this year essentially everywhere — with the exception of mainland China, where I think it's widely recognized that the prolonged lockdown had its effect and impact on the business," he added.

The chief executive added that WSP's entire Asian operation accounts for less than three per cent of profits.

WSP's rapid growth comes on the heels of at least eight buy-ups since May 2022 — including the 6,000-strong environmental consulting business of U.K.-based John Wood Group — on top of nine per cent year-over-year organic growth in net revenue last quarter.

Once a boutique firm called Genivar, the 64-year-old engineering and design consultancy has more than quadrupled its head count over the past decade, swelling to about 67,300 employees as of mid-May, including an additional 10,900 in 2022.

Its employee numbers far exceed rival SNC-Lavalin's peak payroll, which now sits at roughly 36,500 after the Montreal-based competitor shed its construction and oil and gas businesses over the past five years.

WSP's stock is flirting with record highs of around $183 per share — a roughly 150 per cent increase from five years ago — while rival SNC's share price has fallen 23 per cent to about $41 in the same period. WSP's $3.63-billion revenue clocks in 70 per cent above SNC's latest quarterly figure of $2.13 billion, despite the latter's healthy rebound under CEO Ian Edwards since 2019.

"Importantly, WSP’s robust topline did not come at the expense of profitability or future growth," said analyst Frederic Bastien of Raymond James, pointing to an adjusted earnings margin just below 17 per cent amid greater cost efficiency from the mergers.

"If this does not speak to the continued strength of WSP’s end-markets, we simply don’t know what will," he said.

Amid such rapid expansion, however, labour shortages are a persistent growing pain.

While turnover has dropped “significantly” in recent months, the company — and industry — have yet to return to historical levels, L'Heureux said. The voluntary turnover rate at WSP remained "slightly" above its goal of 12 per cent last quarter, he said.

The firm remains focused on green projects that range from offshore wind farms set to power 600,000 New York state homes to carbon capture at a cement plant in Edmonton. But engineering and design of buildings is another burgeoning field for WSP — particularly in health care and "mission-critical" facilities, which must operate without interruption — comprising one-fifth of its business.

"Without naming names, one of the larger tech companies that we were talking to not so long ago was just telling us that they intend to build 120 additional data centres worldwide over the next 12 months. That's one data centre every three days," L'Heureux said, adding that WSP has a master service agreement with the unnamed corporation in Canada, the U.S., Europe and Taiwan.

"For us, this is very, very promising."

In the three months ended July 1, WSP reported net earnings attributable to shareholders reached $150.7 million compared to $89.3 million in the same period a year earlier.

Second-quarter revenues jumped 32 per cent from $2.76 billion the year before, the Montreal-based company said.

WSP said adjusted net earnings increased to $1.56 per share versus $1.30 per share a year prior, beating expectations of $1.49 per share, according to financial markets data firm Refinitiv.

For the full year, the company is projecting adjusted earnings of $1.9 billion to $1.93 billion versus an earlier guidance of between $1.76 billion and $1.84 billion.

This report by The Canadian Press was first published Aug. 9, 2023.

Companies in this story: (TSX:WSP)

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