The market seems to have bought Aecon's narrative: 2024 is a "repositioning" year, a time for consolidation and margin focus. But hidden within the Q1 2024 earnings call transcript lies a tantalizing possibility – a "stealth growth" strategy that could see Aecon significantly outperform expectations.

The official line is clear: expect flat to low growth for 2024, with a surge coming in 2025 as massive progressive design-build (PDB) projects hit the construction phase. This makes sense on the surface. Aecon divested significant portions of its business in 2023 (Aecon Transportation East [Reference] and 49.9% of Skyport [Reference]) and is navigating the final stages of four legacy projects.

Yet, this overlooks a crucial detail: Aecon isn't simply waiting for 2025. The company is actively working on FIVE major PDB projects – Go Expansion OnCorr Works, Scarborough Subway Extension, Darlington New Nuclear, Contrecoeur Terminal Expansion, and the US Virgin Islands Airport redevelopment. While these are currently in development phases, their impact on revenue isn't a binary "all or nothing" scenario.

[Jean-Louis Servranckx], Aecon's CEO, revealed a critical piece of information about the Go Expansion project. The development phase, set to end in late 2024, will see the first TWO bundles of work, worth a combined $2 billion, move into construction. This is expected to happen before the official start of the construction phase in 2025.

Potential Impact of Go Expansion Bundles

Aecon's Q1 2024 revenue was $847 million, down 24% year-over-year. However, adjusting for the 2023 divestitures, revenue was effectively flat. Now, factor in the potential addition of $2 billion in Go Expansion construction revenue, starting in late 2024. Even if only a fraction of this is realized in Q4, it could significantly boost Aecon's top line.

Let's visualize this potential impact:

This chart assumes a conservative 25% realization ($500 million) of the $2 billion Go Expansion bundle revenue in Q4 2024, added on top of the existing revenue run rate.

Gain Share, Pain Share: Minimizing Risk

Servranckx emphasized that the Go Expansion is being structured as a "target price with a gain share, pain share." This means that unlike traditional lump-sum contracts, Aecon isn't taking on the full fixed-price risk for the entire $2 billion scope. Instead, each bundle will be negotiated with a target price, sharing both potential gains and losses with the client. This further reduces risk and enhances margin predictability.

Key PDB Projects in Development

Conclusion: A Potential Upside Surprise

The market appears to be focused on 2025 as the inflection point for Aecon's growth. However, the company's active development of multiple PDB projects, coupled with the phased construction approach for Go Expansion, could create a "stealth growth" scenario in 2024. While uncertainty remains, the potential for Aecon to deliver an upside surprise, driven by these under-the-radar projects, is undeniable.

"Fun Fact: Aecon, founded in 1867, is older than Canada itself (confederated in 1867). This makes Aecon a truly historic company, having played a pivotal role in building the nation's infrastructure. From the iconic CN Tower to the Gordie Howe International Bridge, Aecon's projects have shaped Canada's landscape for over 150 years."