BC Business
Finning shares notched a new all-time high above $34 in May and are currently hovering between $32 and $33.
Finning is the world’s largest Caterpillar equipment dealer
The stock: Not to mix metaphors, but there’s an old saw that the surest path to riches in a gold rush is selling picks and shovels. Well, even with the purported new commodity supercycle now looking tentative, Vancouver-based Finning International (TSX:FTT) has been a rock-solid investment. Shares of the world’s largest Caterpillar (NYSE:CAT) equipment dealer, with exclusive distribution rights in Western Canada, the British Isles and southern South America, notched a new all-time high above $34 in May and are currently hovering between $32 and $33.
The drivers: That’s saying something, because this rare B.C.-based large-cap has been in business 88 years now, the past 52 as a public company. Positive external factors include the surge in the price of copper (B.C. and Chile are both big copper producers) and recovery in Alberta’s oilsands, but Finning deserves some credit on its own for increasing its market share in the construction segment and boosting productivity in areas including HR, facilities and supply-chain processes.
Like many old-economy companies lately, Finning has introduced a digital platform, called CUBIQ, that enables large customers to keep track of their earth movers’ age, condition and depreciation, order parts and track productivity. The company believes the system will eventually become its own profit centre.
There is some concern that Chile’s current process of rewriting its dictatorship-era constitution could darken the outlook for foreign investment in the mining sector. In the face of the resource industry’s inherent volatility, through, Finning has managed to increase its dividend—currently 82 cents per year, for a 2.6-percent yield—for 19 straight years.
Word on the street: “For about 15 years, FTT shares have been range-bound,” opined Scotiabank Global Banking and Markets‘ Michael Doumet following Finning’s first investor day in three years last week. “While the trading psychology’ so far prevails, Finning’s outlook, which targets a record earnings per share of more than $2 over the next five quarters and further incremental EPS growth in a sustained upcycle, enhances the prospects of the shares hitting new highs in the near term.”
Coming and going: With lumber prices falling by nearly half since hitting a dizzying peak of US$1,670 per thousand board feet on May 7, previously soaring forest companies have taken a trim. Canfor Corp. (TSX:CFP) is down 19.8 percent since May 10; Interfor Corp. (TSX:IFP), 18.1 percent; and West Fraser Timber Co. (TSX:WFG), 16.1 percent.