Stocks in the Manufacturing & Industry sector tend to be more volatile than those in the Finance, Utilities and Consumer sectors. Demand for their products moves up and down with the economy.
To cut your risk in the Manufacturing sector, we believe it’s best to stick with well-established firms.
Last week we reported on Finning International (see the article here). Today we report on another manufacturing stock we cover regularly in The Successful Investor.
LINAMAR CORP. (Toronto symbol LNR; www.linamar.com) gets 80% of its revenue by making engines, transmissions and other precision-machined parts for automakers. The company has plants in North America, Europe and Asia.
The remaining 20% of Linamar’s revenue comes from its self-propelled, scissor-type elevating work platforms, which it sells under the Skyjack name, plus consumer products, such as lawn mowers and cargo trailers.
Thanks to rising car demand, the company continues to win new orders from automakers. Rising construction activity has also prompted contractors to order more Skyjack platforms, particularly in fast-growing markets like Brazil.
Canadian stocks: Productivity improvements help Linamar’s earnings jump
In the three months ended September 30, 2013, Linamar’s revenue rose 15.5%, to $893.3 million from $773.4 million a year earlier. Sales of transmissions and other auto parts rose 14.0%, while industrial equipment sales gained 25.1%.
The company’s earnings jumped 54.3%, to $52.0 million, or $0.80 a share, from $33.7 million, or $0.52. In addition to the higher revenue, Linamar’s profits benefited from lower operating costs resulting from its recent productivity improvements. It also spent less to start production of new transmissions and other auto parts.
Linamar holds cash of $117.4 million, or $1.81 a share. The company’s $0.32 dividend yields 0.8%.
In the latest edition of The Successful Investor, we look at Linamar’s outlook moving into the New Year, including its earnings forecast and whether it can hold its strong position in its niche market. We conclude with our clear buy-sell-hold advice on the stock.
(Note: If you are a current subscriber to The Successful Investor, please click here to view Pat’s recommendation in the latest issue. Be sure to log in first.)
If you’re a member of Pat’s Inner Circle and you’d like to ask a question about today’s article, please go to the question page reserved for you (be sure you’re logged in first). Click here to ask your question.
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