Toromont Industries Ltd., a dealer of Caterpillar Inc. construction equipment, jumped to its highest level in more than 10 months as a Raymond James Ltd. analyst upgraded the stock after it beat earnings expectations.
Toromont advanced as much as 5.5 percent to C$23.50, the highest intraday level since March 28. The stock was up 4.1 percent to C$23.18 at 12:23 p.m. in Toronto. The company had gained 5.6 percent this year through yesterday.
“Toromont provided a textbook example of why a well-run equipment dealer can be a great business to own during both good and bad times,” said Ben Cherniavsky, Vancouver-based analyst with Raymond James, said in a note to clients.
Cherniavsky raised the stock’s rating to outperform, the equivalent of a buy, from market perform, equal to a hold, while raising his price target to C$25.75 from C$21.
Toromont, based in Concord, Ontario, reported fourth- quarter adjusted earnings of 59 Canadian cents a share yesterday, compared with Cherniavsky’s estimate of 48 cents and the average consensus expectation of 45 cents according to nine analysts surveyed by Bloomberg.
While new machine sales at Toromont’s Caterpillar dealers dropped 20 percent year-over-year during the quarter, the equipment group’s earnings before interest and taxes rose 10 percent to C$58 million, ahead of Cherniavsky’s C$47-million estimate.
“The major factor behind this profit boost, and the big fourth-quarter earnings beat, was a surge in aftermarket revenues” based on a larger base of installed equipment and more aggressive marketing for high-margin product support, Cherniavsky said.
The company also raised its quarterly dividend 8.3 percent to 13 cents a share from 12 cents a share, payable on April 1 to shareholders of record as of March 13.
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