Finning gains from lower costs

Article Excerpt

FINNING INTERNATIONAL INC. $30 is a buy. The company (Toronto symbol FTT; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 162.1 million; Market cap: $4.9 billion; Price-to-sales ratio: 0.8; Dividend yield: 2.7%; TSINetwork Rating: Above Average; www.finning.com) sells and services Caterpillar-brand heavy equipment in Western Canada, South America and the U.K. Finning’s revenue in the three months ended December 31, 2020, fell 11.7%, to $1.55 billion from $1.76 billion a year earlier. That’s mainly because COVID-19 forced many oil producers and mining firms to restrict their operations. However, due to successful cost controls and lower interest costs, earnings before government wage subsidies and other unusual items jumped 22.6%, to $0.38 a share from $0.31. The current annual dividend rate of $0.82 a share, which yields 2.7%, also looks safe. The company generated free cash flow (regular cash flow less capital expenditures) of $870 million in 2020. That more than covered its dividend payments of $133 million. Finning is a buy. buy…