TSX:FTT - Post Discussion
Post by
retiredcf on May 10, 2022 8:58am
RBC
Outperform
TSX: FTT; CAD 35.02
Price Target CAD 47.00
Finning International Inc.
Q1 results ahead of expectations; Outlook points to 2022 EPS above current consensus
Sentiment: positive
Our view: Q1 results were ahead of forecasts and updated 2022 outlook points to full-year EPS above current consensus.
Strong Q1 results – Q1 revenue was largely in line while earnings were ahead of RBC/consensus forecasts. Q1 Net Revenue was $1,736MM (+18% YoY; cons: $1,754MM), while Adjusted EBIT was $140MM (+51% YoY; RBC/ cons: $110MM/$127MM). This reflected higher-than-expected EBIT from all segments. Backlog exiting Q1 was $2,055MM (+71% YoY; +10% QoQ), of which ~85% is expected to be delivered in 2022 (balance in 2023). Strong increase in inventory (at $2,101MM; +32% YoY & +25% QoQ) positions the company well to deliver on its backlog & to drive continued Product Support growth. We note that Product Support revenues increased YoY across all regions. EPS of $0.59 was also well ahead of RBC/consensus of $0.42/$0.50. See details inside.
2022 earnings guidance nudged higher, implies EPS above current consensus of $2.48 – Management is guiding to "above mid-teens" EPS growth for 2022 (prior guidance was "mid-teens or above"). To provide some context, assuming 15% & 19% YoY growth for 2022 (above 2021 Adjusted EPS of $2.17) implies an EPS range of $2.50-$2.60 (current consensus is $2.48). Dividend increased 5% to $0.236 per share, up from $0.225. In addition, the company renewed its NCIB with allows for repurchase of up to 8MM shares (~5.1% of float as at 5/5/2022).
Positive outlook across all regions:
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In Canada, strong commodity prices + public/private sector investment in Western Canada should continue to support strong demand for construction equipment & product support. Healthy commodity markets also provide a positive backdrop for mining activity in Western Canada & support increased Capex (including in the oil sands).
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In South America, strong copper prices, a large & mature equipment population, & declining ore grades are expected to drive healthy mining activity in Chile. While constitutional reform could lead to a "moderate" increase in royalties, the long-term copper mining picture in Chile remains constructive.
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In U.K. & Ireland, ongoing HS2 construction & government investments in other projects are expected to drive U.K. construction equipment demand & product support. In addition, strong demand for power systems solutions, particularly in the data center market, is expected to continue & grow over the coming years. For more details on Finning's U.K. & Ireland outlook, see our note here following our visit to the company's U.K. operations/facilities & discussion with segment leadership.
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