Opinions
Brian Madden
Finning Int
FTT-T
TOP PICK
May 16, 2018
Stock price when the opinion was issued
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Premium contentWe reiterate FTT, the largest dealer of Caterpillar heavy equipment in the world, as a TOP PICK. They announced $700 million of new orders in April, with orders from Chile, Canada, the UK and Ireland. It trades at 12x earnings, under 2.5x book and supports a 20% ROE. We like that cash reserves are growing, while debt is retired and shares bought back. The dividend is backed by a payout ratio under 30% of cash flow. We continue to recommend a stop at $34, looking to achieve $48 -- upside potential of 20%. Yield 2.4%
(Analysts’ price target is $48.38)Premium contentWe reiterate FTT as a TOP PICK following recently reported record high free quarterly cash flow of $330 million. Management commented that order backlogs are growing, while velocity of deliveries is growing. It trades at 11x earnings, 2.1x book and supports a ROE of 20%. We like that cash reserves are growing while debt is retired and shares bought back. We continue to recommend a stop at $34, looking to achieve $49 -- upside potential of 19%. Yield 2.6%
(Analysts’ price target is $49.33)Premium contentPremium contentQ3 miss due to softness in Western Canada. Capital discipline. Copper activity has been pretty solid, but Trump means there's not going to be as much thirst to go green. Pricing power, but that's over for now. Doesn't see a lot of growth over next couple of years.
Good over the long term. If it's in your non-registered account, don't sell. Easier ways to make $$ over the next 12 months.
It's the world's largest Caterpillar equipment dealer and they also do after-market service and support, which reduces the cyclicality of this business. It boasts 15% ROE and trades at 17x earnings. (Analysts' price target $38.83)