Bullboard - Stock Discussion Forum Finning International Inc T.FTT

Alternate Symbol(s): FINGF

Finning International Inc. provides caterpillar equipment, parts, services, and performance solutions. The Company’s segments include Canada, South America, UK & Ireland, and Other. The Canadian operations sell, service, and rent mainly caterpillar equipment and engines in British Columbia, Alberta, Saskatchewan, the Yukon Territory, the Northwest Territories, and a portion of Nunavut, and also... see more

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Finning International Inc > TD

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Post by retiredcf on Feb 09, 2022 8:25am

TD

As this is a flash report, there's certainly potential for them to raise their current $45 target. GLTA

Finning International Inc.

(FTT-T) C$35.24

First Look: Big Q4/21 EPS Beat; Positive Outlook in All Regions Event

Finning reported Q4/21 EPS of $0.66, a meaningful beat vs. the Street/TDSI at $0.53/ $0.56. The conference call is at 10:00 a.m. ET. Dial-in: 1-800-319-4610.

Impact: POSITIVE

Beat Driven by Canada: The beat vs. our forecast was primarily due to higher- than-expected revenue in Canada and lower-than-expected corporate expenses.
Q4/21 Results: Net revenue of $1.8bln was up 14% y/y, driven by strong product support revenue and record used equipment sales in Canada, and higher new equipment deliveries in South America. EBIT of $157mm (8.9% margin) increased substantially vs. $94mm (6.1% margin) in Q4/20, reflecting very strong SG&A leverage (down 240bps as a % of revenue) and a 40bps improvement in the gross profit margin, as high utilization of the heavy equipment rental fleet in the aftermath of the B.C. flooding offset a slightly less favourable revenue mix.
Positive Outlook: Finning's outlook is positive across-the-board, and it expects upcycle demand conditions in 2022. Sequentially vs. Q3/21, the outlook improved in Canada, with oil sands capex starting to increase. Political uncertainty in Chile remains a risk, but Finning continues to assume a moderate increase in mining royalties. The Q4/21 backlog of $1.9bln is more than double that of Q4/20, and up 19% q/q, with increases in all regions, most notably in Canada, which booked an order for 20 CAT 797F trucks in the oil sands. Supply- chain constraints persist, resulting in longer lead-times for equipment/parts, which Finning is mitigating by offering used equipment, rental, and rebuild options. The company achieved its mid-cycle EPS and ROIC targets six months ahead-of- schedule and continues to target mid-teens+ EPS growth during the upcycle, which should drive upward estimate revisions, as the 2022 consensus estimate/ our forecast imply 7%/10% growth vs. 2021 adjusted EPS of $2.18. One minor negative is that constrained equipment supply, higher-than-expected product support growth, and inflationary headwinds will delay Finning's target to reduce SG&A to 17% of revenue (previously expected during Q3/21-Q2/22).
FCF/Capital Deployment: Free-cash-flow totaled $300mm in 2021, and Finning repurchased ~3% of its shares outstanding (average price of $32.81/share). The company is pursuing M&A, but largely with a focus on complementary businesses of small-to-medium-size.