ROAD - Baird still likes E&C firms for Q3 earnings despite hits to backlog

Channel checks are suggesting that engineering & consulting companies are still OK headed into Q3 earnings, Baird says, but certain aspects of the outlook have deteriorated. In particular, that's backlog, where trends in September are likely holding up "reasonably well" but there's degrading visibility. Nonresidential construction is degrading the most, the firm notes. Many contacts point to recent procurement delays, and smaller average award size, Baird says. "Larger and longer-term project work at higher risk; existing programs/shorter-cycle work expected to continue." Healthcare buildings, and specialty buildings such as data centers, are better markets, it notes, and there's some geographic strength outside the U.S. East Coast (and comparatively better in Canada). But weaker markets include aviation and transit, as well as road/highway. On transit, ridership volumes have declined and are slow to recover. Profit margins remain strong enough that it makes for a tough comp next year: Some temporary cost reductions

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Baird still likes E&C firms for Q3 earnings, despite hits to backlog