SNC Lavalin Expects Earnings to Grow, Dundee Capital Disagrees

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About: SNC Lavalin Group Inc.A (SNCAF)
by: FP Trading Desk
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SNC-Lavalin Inc. (OTCPK:SNCAF) expects its earnings to grow 7% to 9% this year, but Dundee Capital Markets analyst Richard Stoneman isn't buying it.

We remain cautious about SNC's prospects in 2009 given its exposure to the resources sector as well as its beleaguered Goreway project," he said in a note to clients, while reiterating his "sell" rating and C$32 price target.

"Given EBT declined in Q4 to C$88 million, from C$96 million last year and backlog declined, we think the company will face serious challenges meeting its stated goal, in the current economic environment."

Mr. Stoneman added that backlogs in SNC's resource business, which generated 53% of the company's operating earnings, fell 36% on falling commodity prices and difficult financing conditions. In total, backlog declined C$1-billion last year.

SNC shares were down 2.5% through the first hour of afternoon trading on Wednesday.