ShawCor Ltd. (SCL): Canadian Pipeline Firm Sees Exceptional Growth

“ShawCor continued to increase its backlog which reached a new record level of $875 million at March 31,” Buckley said. “The backlog includes firm customer contracts which will be executed over the next 12 months and is indicative of the strong international business environment as well as the positive impact of the acquisition of Socotherm that was completed late in 2012. All indications continue to suggest that the company will generate record financial performance in 2013.”

ShawCor recently announced it had secured a $30 million contract from Statoil Norway to coat pipe in the North Sea. The contract will be executed at the Bredero Shaw pipe coating facility in Leith, Scotland. Pipe will receive polypropylene anticorrosion coating, internal flow efficiency coating and concrete weight coating.

Another player

Another player in the pipe coating industry is Aegion Corp – Class A (NASDAQ:AEGN) , a St. Louis, Mo., company that owns The Bayou Companies, which provides pipe coating and welding services for the oil and gas services onshore and offshore. At a $953 million market cap, Aegion Corp – Class A (NASDAQ:AEGN) is small in comparison to ShawCor’s $2.5 billion market cap. Earnings in first quarter 2013 for Aegion Corp – Class A (NASDAQ:AEGN) were $0.07, down 58% from $0.17 in first quarter 2012.

The Foolish bottom line

The North American oil and gas sector is hampered by a lack of pipeline capacity, but that is likely to improve as Canadian authorities look for ways to improve safety of crude shipments after a runaway train carrying crude crashed in Lac-Mégantic, Quebec, killing 47 people.

While most of ShawCor’s business is in North America, the company continues to benefit from increasing demand for pipe coating services worldwide, especially in Asia-Pacific. The company bought out the Shaw family, reducing share count, and has a record backlog of business. ShawCor’s stock price has been compressed along with the rest of the Canadian energy stocks, but its earnings are growing at exceptional levels. I expect blockbuster financial results in the second quarter.

AltaCorp Capital’s price target for ShawCor Ltd. (TSX:SCL) is $58 by year-end. ShawCor is an undervalued stock with the potential for above-market returns.

The article Canadian Pipeline Firm Sees Exceptional Growth originally appeared on Fool.com and is written by Michael Hooper.

Michael Hooper has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Michael is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

ShawCor Ltd. (SCL): Canadian Pipeline Firm Sees Exceptional Growth

Published on August 1, 2013 at 9:51 am by The Motley Fool in News

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