UPDATE 2-Stantec earnings rise even as revenue drops

Thu Feb 25, 2010 3:43pm EST

* EPS C$0.50 vs previous C$0.44

* Revenue down 7 pct at C$342.8 mln

* Moderate growth seen in second half of 2010

* Stock falls 1.4 pct to C$26.29 on TSX (Adds forecast, analyst comment, updates stock price)

OTTAWA Feb 24 (Reuters) - Stantec Inc (STN.TO) (STN.N) posted a 14.5 percent rise in quarterly earnings on Thursday as lower taxes and more profitable projects at the Canadian design and engineering firm offset a decline in revenue.

Tough market conditions pressured results in the quarter ended Dec. 31, Stantec said, and improvement is not expected any time soon. It forecast moderate revenue growth in the second half of 2010 for regions where it is a top-tier service provider.

"Due to the diversity of our operations, the mixture of our clients, and the flexibility of our organization, we believe that we can continue adapting our business to changing economic conditions and that we will emerge well positioned as the market improves," it said in a statement.

The company, which has a history of aggressive deal-making, repeated its target for long-term, average annual compound gross revenue growth of 15 percent.

Net earnings rose to C$22.9 million ($21.6 million), or 50 Canadian cents a share, in the three months ending Dec. 31, 2009, from C$20 million, or 44 Canadian cents, in the same period the year before.

Revenue fell 7 percent to C$342.8 million.

Analysts, on average, had expected the acquisitive company to earn 49 Canadian cents a share on net revenue of C$311.3 million, according to Thomson Reuters I/B/E/S.

Shares of Stantec fell 38 Canadian cents, or 1.4 percent, to C$26.29 on the Toronto Stock Exchange on Thursday and dropped 55 cents, or 2 percent, to $24.75 on New York in lighter trade.

The company also said it remains confident it can continue taking advantage of acquisition opportunities, because the bulk of the sector's 100,000 firms are small companies.

RBC Capital Markets analyst Sara O'Brien said pace at which Stantec makes acquisitions may slow because takeover targets are unwilling to "revise expectations" despite a weak economy.

Stantec plans to expand its work in international markets to 20 percent of revenue in 2020, from 2 percent now. That expansion, expected from internal growth rather than acquisitions, is seen largely in Anstralia, England and other parts of Europe, Stantec said.

The Edmonton, Alberta-based company's recent projects include an expansion to the Vancouver International Airport, an extension to the Edmonton South light rail transit system and the design of the Whistler Sliding Center, the venue for the 2010 Winter Olympic luge, skeleton and bobsleigh sliding events. ($1 = $1.06 Canadian) (Reporting by Susan Taylor; Editing by Frank McGurty)

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