Linamar Climbs to Record as Profit, Sales Beat Estimates

Updated on

Canadian auto-parts maker Linamar Corp. rallied to an all-time high after first-quarter earnings and sales surged to records, ahead of analysts’ estimates on increasing margins.

Linamar gained 14 percent to a record close of C$83.21 in Toronto trading.

Earnings jumped to C$1.75 a share, ahead of consensus analysts’ estimates of C$1.43, for a ninth straight quarterly beat, according to data compiled by Bloomberg. Profit surged 43 percent to C$113.7 million ($93.6 million) as the Guelph, Ontario-based company added a new forging business in Europe and increased market share in scissor lifts and booms.

“We have completed another outstanding quarter at Linamar with solid market-share gains,” Chief Executive Officer Linda Hasenfratz said in a statement. The company has “an excellent outlook for continued growth over the next several years,” she said.

Net margins reached 8.9 percent in the quarter, the company said. Sales increased 23 percent to a record C$1.28 billion, ahead of the C$1.24 billion average estimate, on margin improvements in the industrial and powertrain segments.

Analysts Peter Sklar at BMO Capital Markets and David Tyerman at Canaccord Genuity each raised their 12-month price targets for Linamar, to C$96 and C$82 respectively. Tyerman also boosted his rating on the stock to buy from hold.

The company raised its 2015 net margin forecast to 7.75 percent to 8.25 percent due to strong performance in both of its operating units, Tyerman said.

Margin Outlook

“This is the fourth 2015 margin-guidance raise and at least the seventh margin-guidance increase in the past two years,” he said. “We think the current guidance range is conservative and our new forecast projects an 8.5 percent net margin for 2015.”

“Linamar continues to deliver significant growth, which we believe reflects the company’s position as a supplier of parts for engines, transmissions and drivelines, a notable growth area,” Sklar said in a report. “Linamar has thus far managed all this growth without any apparent excess costs.”

Sklar maintained his outperform rating for the stock, the equivalent of a buy. Linamar has seven buys, one hold and no sell ratings, according to data compiled by Bloomberg. The stock has gained 17 percent this year, the third-best performer in the Standard & Poor’s/TSX Consumer Discretionary Index.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE