Canada’s building push puts Finning on a record run

The Canadian dealer of Caterpillar Inc.’s massive earth movers and bulldozers is benefiting from a construction boom that’s powered its stock into an epic rally.

Shares of Vancouver-based Finning International Inc. have surged nearly 90% this year and are on pace for their best annual run since at least 1987, according to data compiled by Bloomberg. Analysts predict more gains ahead as a surge in the price of commodities — including gold, copper and silver — has boosted demand for mining equipment, just as a nationwide push for building infrastructure is gathering pace.

“The sentiment shift within Canada has been very helpful in terms of going from a hard ‘no’ on potential pipeline infrastructure projects to how we’re going to do this,” Mark Rutherford, portfolio manager at Mawer Investment Management Ltd. in Calgary, said by phone.

Rutherford, whose firm Mawer has been a Finning shareholder since at least 2016 and currently owns nearly 2.6 million shares, sees long-term benefits for the company from the government’s embrace of infrastructure spending.

Analysts covering the stock expect it to rise nearly 17% over the next 12 months, according to data compiled by Bloomberg. Earnings are expected to climb more than 10% this year, and nearly 11% in 2026.

While Finning has seen many commodity bull runs in its 56-year trading history, it was Canada’s decision to embark on a series of “nation building” projects — from high-speed rail to oil and natural gas pipelines — that’s added extra firepower this year.

The projects are partly driven by the country’s desire to reduce reliance on the US amid growing trading tensions, by expanding ports and rail lines that will allow exporters reach new trading partners.

As part of a budget announced in November, the Canadian government plans to invest C$115 billion ($83.4 billion) over five years to build out areas like transportation and municipal infrastructure.

All of those projects require the heavy equipment that Finning sells.

The company has a nearly C$3 billion equipment backlog and a strong foothold in major markets, said RBC Capital Markets analyst Sabahat Khan, adding that it makes for a robust setup heading into 2026. A company’s backlog can be a demand indicator, supported by higher mining activity and the need for heavy machines like drill rigs and loaders.

Finning’s shares got another boost Thursday after the government signed a deal with Ontario to streamline environmental assessments, speeding up the approval of pending projects. They were trading 1.4% higher as of 9:40 a.m. in Toronto Friday to C$73.25.

Still, the stock is vulnerable to moves in oil and metals prices, which are volatile and could suffer a pullback after the recent rally. A sustained downdraft in those commodities could dampen demand for Finning’s business.

The company, which sells and rents out heavy equipment and also provides parts and service, is one of the top performers in the S&P/TSX Composite Index’s industrials group, third only to Quebec-based jet-maker Bombardier Inc. and Badger Infrastructure Solutions — an excavating company.

Infrastructure engineering firms like AtkinsRealis Group Inc. and Aecon Group Inc. have also got a lift since September when Prime Minister Mark Carney unveiled the project list, while shares of equipment seller Toromont Industries Ltd. have climbed 40% this year.

For Finning, the biggest infrastructure development opportunities associated with Canada’s nation-building push are in the Ksi Lisims liquid natural gas project and mines in British Columbia, Raymond James analyst Steve Hansen wrote in a Dec. 10 note.

Rutherford said Finning has found additional success in expanding its product support business which was key to earnings growth. He noted that many oil sands companies in Canada have purchased mining equipment and are using Finning’s equipment services.

“They’re very well positioned,” he said. “Stock’s reasonably priced, especially relative to other opportunities in the Canadian landscape.”

— By Stephanie Hughes (Bloomberg)