Upgrade Seeing favourable conditions following a better-than-anticipated fourth quarter of 2021, Raymond James analyst Bryan Fast predicts Finning International is heading “to new heights.”
After the bell on Tuesday, the Vancouver-based Caterpillar dealer reported net revenue for the quarter of $1.774-billion, up 14 per cent year-over-year and above the analyst’s $1.704-billion estimate. Adjusted diluted earnings of 65 cents also topped expectations (53 cents).
“In what we view as a conducive environment for Finning (key commodity price strength, reopening of economies, healthy backlog) we see further potential upside, particularly as the company realizes the benefits from an improving macro backdrop and operational leverage after improvements in the underlying business in recent years. Evidence of the efforts were on display this quarter, in which the company achieved mid-cycle targets ahead of schedule,” said Mr. Fast. “We expect the momentum to continue into 2022, as the company focuses on product support growth initiatives while managing margin pressures, and taking part in the energy transition.”
Raising his full-year 2022 EPS projection to 63 cents from 59 cents, he also increased his target for Finning shares by $1 to $44 with an “outperform” rating. The average on the Street is $43.11.
“On a relative basis, Finning’s stock is now trading at a 9.3-times discount to peer Toromont, versus the historical average at 3.6 times,” he said. “Though we remind investors it is a mistake not to own Toromont’s shares because of an expensive relative valuation, the premium is difficult to ignore, especially as Finning continues to deliver solid results.”