Opinions
David Burrows
Finning Int
FTT-T
BUY
Apr 03, 2024
Stock price when the opinion was issued
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We 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)We 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)Q3 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.
The structural backdrop includes a lot of spending on construction and on US manufacturing facilities. Much better supply/demand for energy and materials than we've had in a decade. These are all customers of FTT.
If you look at the performance of CAT, FTT and TIH over the last year, all look very attractive. TIH does more construction, whereas FTT does more materials and so he'd lean more toward that one.