FINNING INTERNATIONAL INC. $22 - Toronto symbol FTT

FINNING INTERNATIONAL INC. $22 (Toronto symbol FTT; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 171.9 million; Market cap: $3.8 billion; Price-to-sales ratio: 0.6; Dividend yield: 2.8%; TSINetwork Rating: Above Average; www.finning.com) sells and services heavy equipment made by U.S.-based Caterpillar Inc. (New York symbol CAT). Its main customers are in the oil, mining, forest products and construction industries.

Lower prices for copper and other commodities are prompting mining companies to cut back on equipment purchases. As a result, Finning’s revenue fell 8.2% in the three months ended June 30, 2013, to $1.6 billion from $1.8 billion a year earlier. Flooding in Alberta also delayed some deliveries. However, demand remains strong in South America. Earnings fell 2.2%, to $0.45 a share from $0.46.

The company’s long-term prospects remain bright. Weak commodity prices will probably prompt Finning’s clients to make their current gear last longer. That should spur demand for its repair and maintenance services, which now supply 50% of its revenue. Finning also earns higher profit margins from services than selling new equipment.

Finning is a buy.

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