SNC-Lavalin (TSX:SNC) is a Montreal-based professional service and project management company. The international giant has come under intense scrutiny in 2019 as it has been embroiled in a Canadian political scandal. Shares have plunged 26.2% in 2019 as of early afternoon trading on April 9.
SNC-Lavalin is expected to release its first-quarter results in early May.
The company is implementing another round of cost-cutting as it seeks to meet lofty financial targets for this fiscal year. This will include a drawdown on hiring. SNC-Lavalin lost a key contract with Chile’s Codelco, and is faced with reputational risks and damaged prospects in Saudi Arabia due to geopolitical tensions that erupted in 2018.
Last week SNC-Lavalin announced that it had secured a deal to sell a 10% stake in the Highway 407 electronic toll road for $3.25 billion to the Ontario Municipal Employees Retirement System.
The company has stated that it intends to use the proceeds to pay down debt and weigh a potential share buyback plan. Shares are currently trading around a 10-year low. Does it make sense for investors to bet on SNC-Lavalin right now?
The stock had an RSI of 45 as of this writing, which puts it in neutral territory as we approach the middle of April. SNC has a steep hill to climb even ignoring its legal issues, which means risk-averse investors should look elsewhere.
The company should be able to weather this storm, but it is tough to justify pulling the trigger on the stock at this stage.
