Ahead of earnings season for machinery and construction stocks, Raymond James analyst Bryan Fast is looking for improved fundamentals amid commodity price strength, expecting “solid” bookings to provide a “compelling backdrop.”
“Acting as headwinds, companies face a shifting and complex supply chain, uncertainty surrounding equipment deliveries, and inflationary pressures,” he added. “We expect these will be over-arching themes during the quarterly earnings season.”
Pointing to commodity price strength and “reasonable” relative valuation, Mr. Fast said he favoursFinning International Inc. and North American Construction Group Ltd. in his coverage universe, believing “both will benefit from improved earnings capacity relative to prior cycles.”
He raised his Finning target to $46 from $44, keeping an “outperform” rating. The average is $44.78.
Mr. Fast’s target for North American Construction Group shares increased by $1 to $27.50, just below the $27.70 average, with an “outperform” rating.
He also increased his target for Toromont Industries Ltd. ( “outperform”) to $127 from $120. The average is $124.56.
“Supported by a rock solid balance sheet, we view TIH as a beacon of stability during market volatility, and expect investors to continue to turn to high-quality, liquid names during uncertain markets,” the analyst saud.
Conversely, he reduced his target for Ritchie Bros. Auctioneers (“market perform”) to US$55 from US$57, which is the current consensus.
“We continue to see Ritchie face equipment supply headwinds, though strength in used equipment prices is providing an offset,” said Mr. Fast.