Caterpillar dealer Finning International’s stock needs to push past a barrier

Open this photo in gallery:

Finning International Inc.

Vancouver

Revenue (2023) $9.5 billion

Profit (2023) $523 million

Three-year share price gain 20%

P/E ratio (trailing) 11.3

Academics and consultants often talk about hiring for fit, and Finning FTT-T, a Caterpillar CAT-N industrial equipment dealer with operations in Western Canada, South America and the British Isles, certainly lucked out when it hired 21-year-old Kevin Parkes in 1996, right after he earned a business degree from Staffordshire University. “I joined in the parts department, on the shop floor,” Parkes, now CEO, says proudly. He’s from the small Midlands town of Cannock (population 70,000), Finning’s headquarters for the United Kingdom and Ireland. “Everybody knows the company.”

Parkes climbed the executive ladder, leaving in 2009 to run Hewden, after Finning sold the equipment rental business, and returning in 2016 as managing director for the U.K. and Ireland. So, in some ways, he says, it wasn’t a surprise when he was named Finning Canada president in 2019 and Finning International CEO in 2023. “There were lots of assessments.” He, his wife and their two university-age children now live in Edmonton.

And as Parkes, 50, cheerfully explains, there’s been a logic to his career and the company’s history. Finning was launched in 1933 in Vancouver and grew regionally until 1969, when it went public on the Toronto Stock Exchange. Over the next 30 years or so, it expanded into the U.K., Alberta and South America (Chile, Argentina and Bolivia). Ireland was next, in 2010, then Saskatchewan, where Finning bought Kramer Ltd. in 2015.

Finning is not unique in being a publicly traded Cat dealer, “but we are in the minority,” Parkes says. Each dealer has its own territory, and Canadian investors may know Toromont Industries in Eastern Canada.

The CEO also adroitly analyzes why Finning’s share price has bounced around between $20 and $40 for much of the past two decades. “Our valuation is as low as it’s ever been on the back of a record year,” Parkes says. Many investors assume Finning is a cyclical play. About half its revenues come from mining (mostly copper, plus Canada’s oil sands) and another 40% from construction. Some investors have gotten used to buying Finning at about $25 and selling at about $40.

But Parkes says those investors might want to focus more on the energy transition and Finning’s “natural hedges.” Oil producers are adjusting, and demand for copper and critical minerals is soaring. As well, about 10% of Finning’s business now stems from electric power generation.

Some analysts now believe Finning will climb beyond $40 and keep going. “There are always good reasons why stocks move,” Parkes says. But sometimes it takes time for markets to catch on.

Plus, five things we learned from Alan Klinkhoff

May is a big month for fine-art auctions in New York and London, and there are sure to be press releases about paintings selling for millions, and whether overall prices are up or down. Alan Klinkhoff owns fine-art galleries in Montreal and Toronto, and he argues—forcefully—that there are nuances in art markets that neophytes and veteran buyers need to understand. /JD

1. Klinkhoff is 71 and part of the second of three generations of his family who’ve run galleries. His father was Montreal’s Walter Klinkhoff, who dealt with about 30 living artists from the 1950s to the 1990s, including A.Y. Jackson, Paul-Émile Borduas and French Post-Impressionists. Alan and his brother often “would go and visit gallery artists and pick up paintings.”

2. There are big differences between living and deceased artists, Klinkhoff says, and between the primary and secondary art markets for their work. Living artists are often heavily promoted, then fade. Where are the three C’s (Chia, Cucchi and Clemente) who were stars in New York in the 1980s? “They were hot until they were not,” Klinkhoff says. After the artist dies, “we get a sense of, is there a demand?”

3. One lot of 50 BCE shares is the same as the next. But “paintings of the same size by the same artist, and even perhaps painted in the same year, can have dramatically different values,” Klinkhoff says. “There are brilliant Picassos that are worth a fraction of other brilliant Picassos.”

4. Some art auctions still generate publicity and a lot of statistics—total sales receipts for Impressionist works are up or down, for instance. But Klinkhoff says glamour has faded, and much of the bidding is now done by phone or internet. And “nothing happens until the last two minutes,” he says. Auctioneers also occasionally resort to tricks to push up prices, like acknowledging so-called chandelier (phantom) bids early on.

5. In 1977, Ottawa set up the Canadian Cultural Property Export Review Board to help value art more rigorously. But Klinkhoff says experienced dealers “are extremely selective what works of art we will appraise and for which institutions and clients.” There are plenty of appraisers who advertise, he says, but they are similar to accountants, whereas a dealer with a lifetime of experience is more like an investment banker.