As the world’s largest Caterpillar dealer, Finning enjoys a privileged market position with extensive geographical diversification across Canada, South America, and Europe. This global footprint lets the firm capitalize on infrastructure development and resource extraction activities across different economic cycles and regions.
The company’s comprehensive service offering includes equipment sales, rentals, parts, and maintenance services. This provides multiple revenue streams and customer touchpoints, creating a resilient business model with strong recurring revenue components.
Meanwhile, the stock trades at just 9.7 times the company’s forward earnings forecast. The shares remain in positive territory for 2025 as compared to the S&P500 dropping into in the red, which bodes well for its future resilience.
FINNING INTERNATIONAL INC. (Toronto symbol FTT; www.finning.com) sells and services Caterpillar-brand heavy equipment in Western Canada but also South America, the U.K. and Ireland. Its main customers are in the oil and gas, mining, forestry products and construction industries.
Western Canada is still Finning’s biggest market, accounting for 52% of overall revenue, followed by South America, mainly Chile, Argentina and Bolivia (35%), and the U.K. & Ireland (13%).
Finning is the world’s largest distributor of equipment such as bulldozers, backhoe loaders, dump trucks and asphalt pavers made by U.S.-based Caterpillar Inc. (New York symbol CAT). Caterpillar-brand products account for 96% of its operations.
The company drives value for investors through the sale of equipment, but also, increasingly, through services. In fact, the servicing of equipment provided 54% of its 2024 revenue, while the sale of new equipment supplied 36%. The balance of its revenue came from the sale of used equipment (5%), rentals (3%) and fuel sales (2%).
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Value Stocks: Tariffs shouldn’t do much damage to Finning
Finning’s overall revenue in the three months ended December 31, 2024, gained 7.3%, to $2.58 billion from $2.40 billion a year earlier. That topped the consensus forecast of $2.49 billion.
Thanks partly to a plan to streamline its operations and reduce the size of its workforce, Finning’s earnings before unusual items rose 6.3%, to $1.02 a share from $0.96. That also beat the $0.87 consensus estimate.
The company also continues to enjoy strong demand for new equipment. Its backlog as of December 31, 2024, was $2.6 billion, up from $2.0 billion at the end of 2023.
The threat of U.S. tariffs on oil and mineral imports will probably hurt demand from its customers in Western Canada. However, those customers will still need to service and replace their aging equipment. As well, new copper mines in Chile bode well for its businesses in South America. In the U.K. and Ireland, new datacentres to run artificial intelligence software should spur demand from electrical power suppliers.
Finning also has a long history of rewarding investors: it has paid cash dividends since 1970 and has raised that payment each year for the past 23 years.
The latest increase came in June 2024, when the company lifted the quarterly dividend by 10.0%, to $0.275 a share from $0.25. The new annual rate of $1.10 a share yields 2.8%.
The company can easily afford to keep increasing the dividend. In 2024, its aggregate dividend payments of $151 million accounted for just 17% of its free cash flow.
In fact, dividends per share are up 31.1% in the past five years.
The company is also an active buyer of its own shares. Stock buybacks reduce the total number of shares outstanding. That boosts earnings per share since profit is divided among fewer shares. The higher per-share earnings make the stock more attractive to investors and helps to drive up the share price.
In 2024, the company spent $322 million on share buybacks. It has now cut the number of its shares outstanding by 16% since 2019.
Finning’s earnings are forecast at $4.05 a share in 2025, and the stock trades at a moderate 9.7 times that estimate. That’s a very attractive multiple, particularly as Finning’s exceptional reputation for quality and service with its customers keeps it the number one choice for operators looking to maximize equipment usage at the lowest cost.
Recommendation in The Successful Investor: Finning International Inc. is a buy.
