Finning International Inc. suffering with its customers

Nov 7th, 2012 – Comment

At this point with oil sands and mining budgets under review and project time lines being extended I would be cautious in how I approach FTT.


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What is your opinion on  FTT.
Thanks,
Joe.
Cavan, Ontario

 

Hey Joe,

Thanks for the assignment. Finning International Inc. (FTT TSX) is the world’s largest Caterpillar dealer operating in three regions, Western Canada (52% of revenue), South America (38% of revenue), and the UK. & Ireland (10% of revenue). New equipment sales represents 45% of revenue, product support 42%, rental 8%, and used equipment sales 5%. Mining contributes the majority of revenue with 62%, followed by construction 27%, and power systems 10%. If you look at their sales into the oil sands you get the picture of an colossus with a dominate share of the market.The company employs 15,000,is headquartered in Vancouver, and pays a dividend that yields 2.359%.

A review of the charts will help identify the risks and opportunities associated with this investment.

 

 

The three-year chart depicts a stock that has not been able to overcome resistance at $30.00 going back to July of 2011 and is currently trading below the 50 and 200-day moving averages. The double top in March of 2012 signalled the end of the advance that started in October of 2011 when the shares were trading below $18.00. In addition the chart indicates that there is support at $23.00 that is holding at this time.

 

 

 

 

 

The six-month chart illustrates the  several buy and sell signals generated by the MACD and RSI over the course of the time frame.  The strongest indicator was the sell in September when the RSI was moving out of an overbought situation and the MACD was turning down as the stock hit $26.50. Currently the shares have been fighting resistance along the 50-day moving average since October.

At this point with oil sands budgets under review and project time lines being extended I would be cautious in how I approach FTT. There are macroeconomic issues that are out of control of management and until things like oil prices, and pipeline capacity to take bitumen to market are resolved the path to growth for the stock has hit a bottleneck.

Make it a profitable day and happy capitalism!

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