UPDATE: Brean Capital Initiates Coverage On Stantec

Michael Gaugler of Brean Capital initiated coverage of Stantec Inc. (USA) STN on Wednesday with a Buy rating and $34 price target. The analyst also placed a C$39 on shares listed on the Toronto Stock Exchange.

"Stantec is primarily a design firm comprised of three Business Operating Units (BOUs) focused on 1) Energy & Resources, 2) Infrastructure, and 3) Buildings," Gaugler wrote. "The diversity of both services offered and end-market sector exposure is, in our opinion, a well-balanced portfolio approach that has enabled the company to deliver consistent results with a wide range of customers (public and private) across North America."

Gaugler believes that Stantec will continue executing through strategic acquisitions and deliver "solid" earnings growth. The analyst notes that the company has dropped its predominately Canadian profile through seven acquisitions during 2014, all within the United States.

Gaugler notes that Stantec generated in excess of C$220 million in free cash flow in 2013, a figure that is expected to continue rising over time. The analyst points out that the company has an estimated 2.5 percent market share in a $100 billion market, and that free cash flow can be used to support organic and acquisition-related growth strategies.