The distribution of Caterpillar machinery in Eastern Canada is now a core part of this industrial supplier’s business following a 2017 acquisition.
Revenue is up 54.1% in the most recent quarter and the stock trades at 18 times the forecast earnings. The company has also raised its dividend for 29 straight years.
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TOROMONT INDUSTRIES LTD. $56(Toronto symbol TIH; www.toromont.com) distributes a broad range of industrial equipment, including Caterpillar machinery, in eastern Canada. It also makes refrigeration systems through its CIMCO business.
In October 2017, Toromont acquired Hewitt Group for $1.02 billion in cash and shares. That firm distributes Caterpillar equipment in Quebec and Atlantic Canada.
The company borrowed most of the cash it needed for the acquisition. That increased its long-term debt from $149.1 million (as of September 30, 2017) to $644.3 million (as of September 30, 2018). Despite the jump, Toromont’s debt remains a moderate 14% of its market cap. It also held cash of $216.9 million.
Blue Chip Stocks: Revenue, earnings, dividend and share price all rise
Revenue in the latest quarter jumped 54.1%, to $900.1 million from $584.2 million a year earlier.
Earnings jumped 39.1%, to $68.7 million from $49.4 million; that included $18.8 million from Hewitt. Per-share earnings increased 33.3%, to $0.84 from $0.63, on more shares outstanding.
The stock has gained nearly 50% since Toromont announced the Hewitt purchase. It now trades at 20.6 times the 2018 forecast earnings of $3.06 a share. Savings from that acquisition could push up earnings in 2019 to $3.50 a share. The stock trades at more reasonable 18.0 times that forecast.
The $0.92 dividend yields 1.6%. The company has raised its dividend annually for the last 29 years.
Recommendation in The Successful Investor: Toromont is a buy.
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