Recommendation: Buy
| Entry Date | Symbol | Recommendation | Entry Price (CAD) | Target 1 (CAD) | Target 2 (CAD) | Holding Duration | Potential Upside* |
|---|---|---|---|---|---|---|---|
| 26 Feb, 25 | FTT | Buy | CAD 43.54 | CAD 46.152 | CAD 48.46 | 15 days | 11.3% |
*Potential Upside (%) indicates the expected percentage increase from the Entry Price to the Target 2 Price.
Data Powered by EOD Historical Data (“EODHD”).
Finning International Inc. sells, services, and rents heavy equipment, engines, and related products in Canada, Chile, Bolivia, the United Kingdom, Argentina, Ireland, and internationally. The company offers articulated trucks, asphalt pavers, backhoe loaders, cold planers, compactors, dozers, drills, electric rope shovels, excavators, hydraulic mining shovels, material handlers, motor graders, off-highway trucks, pipelayers, road reclaimers, skid steer and compact track loaders, track loaders, underground-hard rock, wheel loaders, and wheel tractor-scrapers, as well as mobile and stationary generator sets. It also provides blades, buckets - skid steer loaders, forks, hammers, augers, brooms, material handling, mulchers, grapples, couplers " loaders, backhoes, buckets "telehandlers, trenchers, stump grinders, multi-processors, buckets " loaders, electric power controls, rakes, couplers " excavators, bale grabs, cold planers, compactors, flail mowers, buckets " mining shovels, pulverizers, nursery products, buckets " compact wheels loaders, buckets " backhoe rears, bale spears, tillers, shears, buckets " backhoe fronts, tilt rotate systems, adapters, rippers, saws, snow products, and buckets " excavators. In addition, it offers power systems for electric power generation, oil and gas, industrial, and marine power systems; and rents generators, power distribution products, and air compressors. Further, the company provides aftercare, fluid analysis, finning managed, financing, warranty, customer training solutions, as well as rebuilds, rentals, and repair services. It serves agriculture, construction, forestry, electric power generation, industrial and waste, industrial OEMs, marine, mining, oil and gas, paving, and quarrying industries. The company was formerly known as Finning Ltd. and changed its name to Finning International Inc. in April 1997. Finning International Inc. was incorporated in 1933 and is headquartered in Surrey, Canada.
Robust Free Cash Flow – The company generated CAD 865 million in free cash flow in 2024, significantly improving liquidity and financial flexibility compared to CAD 66 million in 2023.
Strong Revenue Growth – Finning reported a 7% increase in net revenue for Q4 2024 (CAD 2.6 billion vs. CAD 2.4 billion in Q4 2023) and a 6% increase in full-year net revenue (CAD 10.1 billion vs. CAD 9.5 billion in 2023).
Weaker Canadian EBIT Performance – Canada's EBIT margin fell by 160 basis points to 8.1%, primarily due to a higher proportion of lower-margin mining equipment deliveries.
Declining Profit Margins – Gross profit as a percentage of net revenue declined from 25.9% in Q4 2023 to 24.5% in Q4 2024, while EBIT as a percentage of net revenue dropped from 9.6% to 8.7%.
Key investment risks for Finning include declining profit margins, exposure to cyclical industries like mining and construction, potential economic slowdowns in key markets such as Canada and the UK, and the impact of fluctuating commodity prices on equipment demand.
| Entry Price | Support* | Target 1 | Target 2 |
|---|---|---|---|
| 43.54 | 39.45 | 46.152 | 48.46 |
Data Source: REFINITIV, Analysis: StockNextt
*Support can be considered as an indicative stop-loss, and if prices move below that level on closing basis individuals may evaluate exiting the position depending on their risk appetite, previous holdings, and other factors considered. The support and resistance levels may need to be re-evaluated within 4-6 weeks’ time frame depending on the stock price movements from the date of recommendation on the stock.
Revenue Growth and Financial Performance
Finning reported strong financial results for the fourth quarter of 2024, with revenue reaching CAD 2.9 billion and net revenue increasing by 7% to CAD 2.6 billion. This growth was primarily driven by a 12% rise in new equipment sales and a 6% increase in product support revenue. For the full year 2024, net revenue totaled CAD 10.1 billion, reflecting a 6% increase compared to 2023. Despite these gains, the company experienced a decline in gross profit as a percentage of net revenue, which stood at 24.5% in Q4 2024, down from 25.9% in the prior-year quarter.
Earnings and Margins
Earnings before interest and taxes (EBIT) for Q4 2024 reached CAD 223 million, with an EBIT margin of 8.7%, representing a 90-basis-point decrease from the adjusted EBIT margin in Q4 2023. Regionally, EBIT as a percentage of net revenue stood at 10.9% in South America, 8.1% in Canada, and 5.8% in the UK and Ireland. The UK and Ireland operations showed significant improvement, more than doubling EBIT, whereas lower margins in the Canadian market offset overall gains.
Cash Flow and Debt Position
Finning generated strong free cash flow of CAD 399 million in Q4 2024, bringing the full-year total to CAD 865 million. The company also improved its financial position by reducing its net debt to adjusted EBITDA ratio to 1.5 times at the end of 2024, down from 1.7 times in Q3 2024. The equipment backlog grew to CAD 2.6 billion as of December 31, 2024, reflecting a 14% sequential increase and a 27% increase from the prior year, driven by strong order intake from mining and construction customers.
Regional Performance
In South America, net revenue increased by 15%, driven by strong demand for new equipment and a 10% rise in product support revenue, particularly in the mining and oil and gas sectors. Canadian operations faced challenges, with net revenue remaining stable compared to Q4 2023. While product support remained strong in the power and mining sectors, slower construction activity weighed on overall performance. Meanwhile, UK and Ireland operations delivered a 4% increase in net revenue, with new equipment sales rising by 11%. EBIT in the region more than doubled due to strategic cost reductions and increased product support revenue.
Strategic Execution and Capital Allocation
Finning continued to focus on cost efficiency, capital optimization, and market resilience. Selling, general, and administrative (SG&A) expenses as a percentage of net revenue improved to 16.0% in Q4 2024, reflecting a 30-basis-point reduction from the prior year. The company maintained its commitment to shareholder returns, repurchasing 8.1 million shares at an average price of CAD 39.68 per share and declaring a quarterly dividend of CAD 0.275 per share, payable on March 6, 2025.
Outlook and Future Strategy
Looking ahead to 2025, Finning plans to increase capital and rental fleet expenditures beyond the CAD 219 million spent in 2024, with a focus on expanding capabilities in South America and strengthening its rental fleet in Canada. The UK construction sector is expected to remain soft due to low GDP growth, though demand for used equipment and power systems is projected to grow, particularly in the data center market. The company remains committed to executing its strategic plan by maximizing product support, optimizing cost and capital efficiency, and prudently expanding its used, rental, and power businesses to enhance long-term returns.
Considering recent key business, financial updates, current trading levels, and key business risks, a ‘Buy’ recommendation has been given on Finning International Inc (TSX: FTT) at the closing market price of USD 43.54, as on February 25, 2025.
Data Powered by EOD Historical Data (“EODHD”).
Sector: Industrials Industry: Industrial Distribution
| Company | Change (CAD) | Price (CAD) | Trailing PE (x) | Forward PE (x) | Price Sales TTM (x) | Price to Book Value (x) | Enterprise Value to Revenue (x) | Enterprise Value to EBITDA (x) |
|---|---|---|---|---|---|---|---|---|
| FTT Finning International Inc. |
-0.19 0.47% | 40.30 | 11.86 | 9.65 | 0.53 | 2.25 | 0.77 | 6.76 |
| TIH Toromont Industries Ltd. |
0.38 0.34% | 113.01 | 19.55 | 18.80 | 1.97 | 3.37 | 1.98 | 10.62 |
| RUS Russel Metals Inc. |
0.35 0.89% | 39.66 | 13.65 | 10.30 | 0.56 | 1.50 | 0.59 | 7.38 |
| ADEN ADENTRA Inc. |
0.70 2.54% | 28.29 | 14.38 | 8.24 | 0.45 | 1.13 | 0.56 | 7.29 |
| DBM Doman Building Materials Group Ltd |
-0.02 0.29% | 6.82 | 12.10 | 10.18 | 0.31 | 1.24 | 0.64 | 8.78 |
Data Powered by EOD Historical Data (“EODHD”).
Related Risks: This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the stocks has not been considered in the decision-making process. Other factors which could impact the stock prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.
Note 1: Past performance is not a reliable indicator of future performance.
Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is February 25,2025. The reference data in this report has been partly sourced from REFINITIV.
Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.
Target: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Target 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Target 2 may act as the crucial resistance level for the stock.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
Disclaimer :
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