Executive Summary / Key Takeaways

• Stantec has reached a structural inflection point where its 145+ acquisition strategy has created North America's largest integrated engineering and architecture platform, delivering record 19% EBITDA margins that reflect scale economies and pricing power rather than cyclical tailwinds.
• The company's positioning at the intersection of water security, climate adaptation, energy transition, and advanced manufacturing reshoring creates multiple non-discretionary revenue streams, with a $8.4 billion backlog providing 13 months of forward visibility across five diversified business units.
• Management's 2025 guidance raise to 17.2-17.5% EBITDA margin and 18.5-21.5% EPS growth, combined with confidence in positive U.S. organic growth in 2026, signals that Q1 procurement headwinds were temporary rather than indicative of demand deterioration.
• The Page acquisition transforms Stantec into the second-largest architectural firm in North America, immediately contributing to Buildings segment revenue synergies while deepening exposure to high-growth data center and mission-critical facility markets that currently represent 2-3% of net revenue but are expanding rapidly.
• Critical variables for the investment thesis include: 1) successful integration of Page without margin dilution, and 2) conversion of verbally awarded U.S. projects into signed backlog, which management asserts will drive acceleration in H2 2025 and into 2026.

Setting the Scene: The Quiet Engineering Giant Hitting Its Stride

Stantec Inc., founded in 1954 in Edmonton, Canada, has spent seven decades building what most investors still mistake for a traditional cyclical engineering consultancy. That perception is outdated. Through over 145 acquisitions in three decades, culminating in the transformational Page acquisition in July 2025, Stantec has assembled North America's largest integrated engineering and architecture platform—a business model that generates fundamentally different economics than its pure-play competitors.

The company makes money by providing professional services across five operating units: Water, Energy & Resources, Buildings, Infrastructure, and Environmental Services. What matters for investors is not this segmentation itself, but how Stantec has positioned each unit to capture secular, non-discretionary spending trends. Water services address aging infrastructure and climate-driven scarcity and flooding. Energy & Resources focuses on copper mining for the energy transition. Buildings targets advanced manufacturing facilities and data centers. Infrastructure captures IIJA-funded transportation projects. Environmental Services handles disaster recovery and energy transition compliance. This diversification is not random—it is a deliberate strategy to create multiple growth vectors while insulating the company from any single end-market cyclicality.

Stantec sits in the middle of an industry structure dominated by five major players—AECOM , Jacobs , WSP Global (WSP), Tetra Tech , and Stantec—who collectively control 51% of the U.S. environmental consulting market, up from 39% in 2019. This consolidation reflects a fundamental shift: clients increasingly prefer integrated, multidisciplinary firms that can manage complex projects from design through environmental compliance. Stantec's acquisition of Page, with over $300 million in net revenue, leapfrogs it into the number two architectural position in North America while making it the largest integrated engineering and architecture firm. This matters because integrated projects command higher margins and stickier client relationships than siloed services—a structural advantage that pure engineering or pure architecture competitors cannot easily replicate.

The demand drivers are both macro and durable. Water security concerns, climate change impacts, aging infrastructure replacement, energy transition requirements, and the reshoring of advanced manufacturing create a multi-decade tailwind. The U.S. Infrastructure Investment and Jobs Act has spent less than 40% of its allocated funds, while Canada's 2025 federal budget prioritizes infrastructure investment. In Germany, a €500 billion infrastructure bill is funding transportation, rail, and electrical transmission projects where Stantec's newly acquired ZETCON business is already delivering double-digit organic growth. These are not discretionary projects that get canceled in downturns—they are essential investments in economic competitiveness and climate resilience.

Technology, Products, and Strategic Differentiation: The Integration Premium

Stantec's core technology is not a software platform or patented material—it is the accumulated expertise and integrated delivery model that transforms disparate engineering and architectural disciplines into a unified client solution. This integration creates tangible economic benefits. When Stantec serves as owner's engineer for Manitoba Hydro's $7 billion high-voltage direct current project, or delivers specialist engineering for two Western Australian hospitals worth over $1.25 billion combined, it is not selling hours of labor. It is selling risk mitigation, schedule certainty, and single-point accountability that command premium pricing.

The Page acquisition exemplifies this differentiation. Page brings deep expertise in advanced manufacturing, data centers, and healthcare—sectors where Stantec's engineering capabilities can now be bundled with award-winning architecture from day one. Management reports that revenue synergies are already being realized, even as financial integration continues through year-end 2025. This demonstrates that Stantec's M&A playbook extends beyond simple scale acquisition to strategic capability building that expands addressable markets. A client building a gigawatt-scale data center no longer needs to hire separate architecture and engineering firms; Stantec provides both, capturing more of the project value while delivering better coordination.

Sustainability and community focus serve as another differentiator. In an era where ESG considerations increasingly influence public sector procurement, Stantec's leadership in low-carbon design and environmental consulting creates a competitive moat. The company's work on PFAS regulation , shoreline protection, and water reuse projects positions it as a partner rather than a vendor for municipalities facing climate pressures. This translates into longer-term framework agreements—like the 20+ frameworks won under the UK's AMP8 program —that provide revenue visibility and reduce selling costs.

The German market entry through ZETCON reveals Stantec's methodical approach to geographic expansion. While integration has been slower due to language and accounting differences, the business is performing well and serves as a platform for further growth. Management highlights a major electrical transmission project and increased transit/rail volume, supported by the €500 billion infrastructure fund. This indicates Stantec's ability to successfully enter new geographies and compete effectively, even against entrenched local players, by leveraging its integrated service model and capitalizing on massive public investment programs.

Financial Performance & Segment Dynamics: Evidence of Structural Margin Expansion

Stantec's third quarter 2025 results provide compelling evidence that margin expansion is structural, not cyclical. Net revenue grew 12% to $1.7 billion, driven by over 5% organic growth and over 5% acquisition growth. Adjusted EBITDA increased 18% year-over-year to a record 19% margin, a 100 basis point improvement from Q3 2024. What matters is the driver: project margins remained stable at 54.4%, while administration and marketing expenses fell 100 basis points to 37.6% of net service revenue. This reflects scale economies, higher utilization, and disciplined cost management—not one-time project windfalls.

The year-to-date operating cash flow increase of 86% to $551 million is equally significant. This improvement stems from strong revenue growth, operational performance, and collection efforts that reduced Days Sales Outstanding to 73 days, down from 77 days at year-end 2024. Management now suggests "the mid-70s is the new starting point," indicating a permanent improvement in working capital efficiency. For investors, this means Stantec is converting revenue growth to cash more effectively, providing capital for dividends, M&A, and potential buybacks while maintaining leverage at 1.5x net debt/adjusted EBITDA—well within the 1-2x target range.

Segment performance reveals the multi-engine growth strategy in action. Water delivered almost 13% organic growth in Q3, with Canada Water exceeding 20% and U.S. Water posting double-digit growth. Energy & Resources achieved nearly 10% organic growth, driven by copper mining projects in South America supporting the energy transition. Buildings saw U.S. net revenue increase over 40% due to Page and continued organic strength. Infrastructure generated high single-digit growth in Canada and double-digit growth in Germany. Only Environmental Services lagged at low single-digit growth, but management expects acceleration in 2026 as verbally awarded federal projects are signed.

The backlog provides crucial forward visibility. At $8.4 billion—representing approximately 13 months of work—backlog grew almost 15% year-over-year, with 5.6% organic growth. The U.S. backlog was flat year-to-date due to procurement delays, but management explicitly states this is not an indicator of organic growth for 2026, pointing to verbally awarded projects awaiting signature. This distinction between timing issues and demand deterioration suggests that reported backlog understates true forward demand.

Outlook, Management Guidance, and Execution Risk

Management's guidance narrative reveals confidence rooted in diversification. The full-year adjusted EBITDA margin outlook was raised and narrowed to 17.2-17.5%, reflecting strong performance and disciplined cost management. Adjusted EPS growth guidance of 18.5-21.5% implies continued operational leverage. The company maintains mid-single-digit U.S. organic growth guidance despite Q1's 2.4% print, citing persistent but temporary procurement cycle slowdowns.

The 2026 outlook is more telling than 2025 guidance. Management sees "really strong momentum" from multiple sources: AMP8 ramp-up in the UK, continued water framework growth in Australia and New Zealand, copper demand supporting Energy & Resources mining teams, Canadian federal budget infrastructure commitments, and U.S. macro fundamentals (aging infrastructure, climate impacts, reshoring, data centers) remaining strong. This demonstrates that Stantec's growth is not dependent on a single market or policy, thereby reducing the risk of a catastrophic guidance miss.

Execution risks center on two areas. First, the Page integration must deliver on revenue synergies without margin dilution. Management reports the integration is "going very well" with synergies already realized, but full financial system integration won't complete until year-end 2025. Second, the U.S. procurement environment must normalize. Management attributes slower cycles to executive orders and government shutdowns, but notes the IIJA program "remains intact" with less than 40% of funds spent. The "One Big Beautiful Bill Act" could provide additional stimulus.

The M&A pipeline adds another layer of optionality. Management describes "lots of discussions ongoing" with private firms coming to market, and notes that cycle times vary from quick deals with known partners to 3-6 month processes. Stantec is "comfortable" going above its 1-2x leverage target for the right acquisition, and sees M&A as a "really significant value creator." This suggests the company can continue supplementing organic growth even if macro conditions soften, providing downside protection for the growth trajectory.

Risks and Asymmetries: What Could Break the Thesis

The most material risk is that U.S. procurement cycle slowdowns reflect structural rather than temporary changes. If federal, state, and local governments permanently alter their contracting processes or reduce infrastructure spending, Stantec's U.S. organic growth could stall. The flat year-to-date U.S. backlog is the canary in this coal mine. While management insists verbally awarded projects will convert, investors should monitor whether these signatures materialize in Q4 2025 and Q1 2026. A continued delay would suggest deeper issues with government client budgets or priorities.

Thames Water's financial difficulties in the UK present a second risk. While management correctly notes that AMP8 work must continue regardless of ownership—water companies must spend capital to justify rate increases—the situation could create payment delays or contract renegotiations. Stantec's appointment to Thames Water's £400 million framework and 20+ other AMP8 frameworks provides diversification within the UK water market, but a nationalization or bankruptcy could disrupt cash flow timing.

Integration risk from the Page acquisition is the third key concern. While early synergies are promising, Page represents Stantec's largest architectural bet, and any cultural misalignment or client attrition could pressure margins. The Buildings segment's 40% U.S. revenue growth in Q3 includes Page's contribution, making it difficult to assess underlying organic momentum. Investors should watch for any margin compression in Q4 2025 or Q1 2026 as integration costs peak.

On the upside, two asymmetries could drive meaningful outperformance. First, data center and mission-critical facility demand is accelerating faster than the 2-3% of net revenue currently disclosed. With over 100 projects ranging from 20 megawatts to a gigawatt, this could grow to 4-5% of revenue quickly, providing a high-margin growth vector. Second, the German infrastructure market's €500 billion funding could drive outsized growth in the Global segment beyond current mid- to high-single-digit guidance, particularly if Stantec expands beyond its current transmission and transit projects.

Valuation Context

At $96.56 per share, Stantec trades at a market capitalization of $11.03 billion and an enterprise value of $12.71 billion. The stock's valuation multiples reflect its transformation from cyclical engineering firm to integrated platform. The price-to-earnings ratio of 31.97 and forward P/E of 27.51 sit above traditional engineering peers but below high-growth software companies, appropriately positioning Stantec as a hybrid growth-and-income story.

Cash flow multiples provide a clearer picture of value creation. The price-to-operating-cash-flow ratio of 17.97 and price-to-free-cash-flow ratio of 19.15 are more attractive than earnings multiples, reflecting the company's improved working capital management and 86% cash flow growth. With a dividend yield of 0.67% and a payout ratio of only 20.87%, Stantec returns capital to shareholders while retaining ample flexibility for growth investments.

Relative to direct competitors, Stantec's valuation appears reasonable for its quality. AECOM (ACM) trades at 21.5x earnings but with lower margins (7.02% operating margin vs. Stantec's 13.66%) and higher leverage (1.25x debt/equity vs. 0.84x). Jacobs (J) trades at 52.5x earnings with lower growth and a higher payout ratio (48.45% vs. 20.87%). Tetra Tech (TTEK) trades at 37.4x earnings with similar margins but smaller scale. Stantec's EV/Revenue of 2.22x and EV/EBITDA of 19.09x reflect its integrated model premium and margin expansion trajectory.

The balance sheet supports continued investment. With net debt to adjusted EBITDA at 1.5x—within the 1-2x target range—and management comfortable exceeding this for the right acquisition, Stantec has firepower for its M&A pipeline. The 1.27 current ratio and 1.23 quick ratio indicate solid liquidity, while the 16.22% return on equity and 6.42% return on assets demonstrate efficient capital deployment.

Conclusion

Stantec has evolved from a regional engineering consultancy into an integrated infrastructure platform uniquely positioned to capture multiple secular tailwinds while delivering structural margin expansion. The record 19% EBITDA margin in Q3 2025 is not a cyclical peak but evidence that 145 acquisitions have created scale economies and pricing power that pure-play competitors cannot match. With a $8.4 billion backlog, diversified exposure to water security, climate adaptation, energy transition, and advanced manufacturing, and a proven M&A playbook, Stantec offers a compelling combination of growth and resilience.

The investment thesis hinges on two variables: successful Page integration and U.S. procurement normalization. If management delivers on its 2026 strategic plan target of $7.5 billion net revenue while maintaining margins, the stock's current 31x P/E will compress through earnings growth rather than multiple contraction. If procurement delays persist or Page integration falters, the downside is cushioned by diversified geographic and segment exposure. For long-term investors, Stantec represents a way to own the infrastructure buildout essential to climate adaptation and economic competitiveness, managed by a team that has demonstrated capital allocation discipline and operational excellence.