FTT: Future Returns Will Reflect Higher Rating And Ongoing Buyback Support

Analysts have nudged their fair value estimate for Finning International higher to $87.67 from $85.56, reflecting updated assumptions for discount rate, revenue growth, profit margin and forward P/E, which are broadly in line with recent price target increases reported by Scotiabank and RBC Capital.

Analyst Commentary

Bullish Takeaways

Bullish analysts are lifting their price targets into the high C$80s, which lines up with a view that the current valuation can support higher fair value if the company stays on track with its plans.
The move to C$89 from C$67 by one firm suggests their models now assume stronger execution on revenue and margin assumptions than before, which feeds into a higher P/E they are comfortable using.
Recent target revisions are broadly consistent with the updated fair value estimate of $87.67, which can give investors a reference point for where some Street models see risk and reward balancing out.
Bullish analysts appear confident enough in the company’s setup to maintain positive ratings while raising targets, which points to a view that the current share price still leaves room before reaching their assessed value.

Bearish Takeaways

Even with higher targets, some cautious analysts may see the stock trading closer to their revised fair values, which could limit upside if execution or end markets fall short of their assumptions.
The reliance on higher revenue growth and profit margin inputs in refreshed models leaves less room for disappointment, so any miss against those embedded expectations could put pressure on the shares.
As targets cluster near the high C$80s, investors may face a tighter margin of safety if the P/E multiples used in these models are later reassessed due to changes in risk appetite or sector sentiment.
Target increases do not remove fundamental risks around project timing, capital allocation, or cost control, and more cautious analysts are likely to keep those factors front of mind when comparing price to their fair value work.

What’s in the News

From July 1, 2025 to September 30, 2025, Finning International repurchased 1,199,800 shares for C$71 million, equal to 0.9% of its shares. (Key Developments)
Under the buyback announced on May 12, 2025, the company has now repurchased a total of 1,432,028 shares, representing 1.08% of its shares, for C$110.69 million. (Key Developments)
This update confirms completion of the current buyback tranche that ran through the third quarter of 2025, providing a clearer view of the company’s recent capital return via share repurchases. (Key Developments)

Valuation Changes

The fair value estimate has risen slightly to $87.67 from $85.56, representing a modest upward reset to the central valuation anchor.
The discount rate has moved slightly higher to 7.61% from 7.54%, indicating a marginally higher required return in the updated model.
Revenue growth now reflects a 1.76% decline compared with a 1.72% decline previously, a small change in the pace of expected revenue contraction.
The net profit margin has edged up to 6.53% from 6.52%, implying only a very slight adjustment to profitability assumptions.
The future P/E has risen slightly to 17.91x from 17.44x, pointing to a small uplift in the multiple used for forward earnings in the valuation work.

Strong demand in core sectors and rising order backlogs point to sustained future growth, especially in high-margin aftermarket and product support services.
Operational efficiency, automation, and strategic expansion into Latin America and clean energy markets are expected to drive profitability and long-term competitive positioning.
Persistent margin and cash flow pressures from labor costs, inventory build-up, and subdued equipment demand threaten near-term profitability and financial flexibility despite strong order intake.

Catalysts

About Finning International

Sells, services, and rents heavy equipment, engines, and related products in Canada, Chile, the United Kingdom, Argentina, and internationally.What are the underlying business or industry changes driving this perspective?

Significant increase in new equipment backlog to $3 billion (up 38% year-over-year) and a record surge in Power Systems backlog (now $1 billion, +88% y/y), both driven by strong demand in mining, infrastructure, oil & gas, and especially data centers-reflecting future tailwinds from global infrastructure spending and digitalization. This supports growth in future revenues and long-term product support annuities.
Robust order intake across all regions and segments, particularly in Canada with construction and mining orders nearly doubling year-over-year, indicates accelerating fleet renewals, modernization, and long-term customer commitments, which are likely to convert into sustained revenue growth and increased equipment population for high-margin aftermarket services.
Growth and resilience in higher-margin product support and services across regions, with product support revenues up in all geographies (notably mining and power), reflecting ongoing expansion of the installed base and increasing adoption of digital and value-added services-directly supporting higher net margins and recurring earnings.
Continued investment in operational efficiency initiatives (cost streamlining, automation like AutoStore, digital tools for parts and service delivery), expected to unlock further SG&A savings (over $20 million identified so far) and enhance operating leverage, potentially driving margin expansion and improved return on invested capital going forward.
Strategic focus on capturing mining and energy-related equipment demand in fast-growing Latin American markets (notably Chile), combined with exposure to resource security and clean energy transition sectors (e.g., critical minerals, data centers), positions Finning competitively to benefit from industry shifts toward resource infrastructure investment and low-emission equipment, underpinning long-term revenue and EBITDA growth.

Finning International Earnings and Revenue Growth

Finning International Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Finning International's revenue will decrease by 2.4% annually over the next 3 years.
Analysts assume that profit margins will increase from 4.6% today to 6.6% in 3 years time.
Analysts expect earnings to reach CA$700.0 million (and earnings per share of CA$5.08) by about September 2028, up from CA$525.0 million today.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 13.9x on those 2028 earnings, down from 14.4x today. This future PE is lower than the current PE for the CA Trade Distributors industry at 14.4x.
Analysts expect the number of shares outstanding to decline by 3.73% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.7%, as per the Simply Wall St company report.

Finning International Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Persistent margin pressures in South America due to labor shortages, increased costs associated with negotiating higher union compensation, and growing pains from rapid technician hiring and expansion-risks long-term net margin improvement.
Slower and subdued equipment utilization and construction activity in the UK and Canada, despite strong order intake, may limit immediate revenue realization and threaten the sustainability of backlog-driven revenue growth.
Used equipment sales remain volatile, with recent declines and ongoing recalibration of market demand; continued excess inventory or depressed pricing could dampen both revenues and margins in that segment.
Potential for sustained working capital build-up, driven by higher inventory levels-especially parts and mining trucks-which could constrain free cash flow and limit management's flexibility to invest or return capital to shareholders.
Increased cost intensity in the growing Power Systems backlog-particularly as power business relies on large, lumpy projects and requires continuous investment in operational capacity-which could limit net margin expansion if not matched by efficient execution and recurring high-margin service revenues.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of CA$66.667 for Finning International based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of CA$71.0, and the most bearish reporting a price target of just CA$58.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be CA$10.6 billion, earnings will come to CA$700.0 million, and it would be trading on a PE ratio of 13.9x, assuming you use a discount rate of 7.7%.
Given the current share price of CA$57.25, the analyst price target of CA$66.67 is 14.1% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

FTT: Operational Execution And Share Buybacks Will Sustain Long-Term Performance