Earnings call transcript: Finning International Q1 2026 results miss expectations

Finning International Inc. reported its first-quarter 2026 earnings, revealing a slight miss in both earnings per share (EPS) and revenue against forecasts. The company posted an EPS of CAD 1.02, compared to the expected CAD 1.04, and revenue of CAD 2.5 billion, below the forecasted CAD 2.53 billion. Despite these misses, the stock surged 7.57% in after-hours trading, closing at CAD 104.97, reflecting investor optimism about the company’s strategic initiatives and future growth prospects.

Finning International demonstrated strong execution across its diversified portfolio despite missing earnings expectations. The company achieved the highest Q1 adjusted EPS in its history, driven by robust product support revenue growth and strategic investments in key sectors such as mining and construction. The company’s focus on technological innovation and market expansion, particularly in data centers and mining equipment, positions it well for future growth.

Finning’s Q1 2026 EPS of CAD 1.02 fell short of the CAD 1.04 forecast, marking a 1.92% negative surprise. Revenue also missed expectations, coming in at CAD 2.5 billion, 1.19% below the forecasted CAD 2.53 billion. This minor miss contrasts with previous quarters where the company had consistently met or exceeded expectations.

Despite the earnings miss, Finning’s stock price increased by 7.57% in after-hours trading, closing at CAD 104.97. This positive movement suggests that investors are optimistic about the company’s strategic direction and future growth potential, particularly in the mining and data center sectors. The company’s shares have delivered a remarkable 103% return over the past year, though InvestingPro analysis indicates the stock is currently trading above its Fair Value. With a P/E ratio of 20.14 and an attractive PEG ratio of 0.59, the valuation reflects strong growth expectations. Investors can explore more valuation insights on the Most Overvalued stocks list. The stock’s recent performance contrasts with its 52-week range, where it had previously seen a low of CAD 47.38 and a high of CAD 106.15.

Finning’s guidance for the upcoming quarters reflects continued confidence in its strategic initiatives. The company projects an EPS of CAD 0.95 for Q3 2026 and CAD 0.84 for Q4 2026, with revenue forecasts of CAD 2.12 billion and CAD 2.06 billion, respectively. Long-term visibility into data center projects and mining opportunities supports a positive outlook. Notably, InvestingPro Tips highlight that Finning has raised its dividend for 24 consecutive years, underscoring management’s commitment to shareholder returns. For deeper analysis, investors can access Finning’s comprehensive Pro Research Report, one of 1,400+ available reports that transform complex data into actionable intelligence. Want to discover more? InvestingPro offers 10 additional exclusive tips for Finning.

CEO L. Scott Thomson stated, "Our strong Q1 performance, despite the earnings miss, highlights the resilience of our business model and our ability to execute on strategic initiatives." He emphasized the company’s focus on expanding its mining and data center capabilities as key drivers for future growth.

During the earnings call, analysts inquired about the impact of supply chain issues on backlog deliveries. Executives assured that strategic inventory investments have been made to mitigate these challenges. Additionally, questions about the expansion into new markets were addressed, highlighting the company’s proactive approach to capturing growth opportunities in emerging sectors like data centers and mining.

Operator: Thank you for standing by. This is the conference operator. Welcome to the Finning International Inc. Q1 2026 investor call and webcast. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. Analysts who wish to join the question queue may press star then one on their telephone keypad. Should you need assistance during the conference call, you may reach an operator by pressing star then zero. I would now like to turn the conference over to David Primrose, Executive Vice President and Chief Financial Officer. Please go ahead.

David Primrose, Executive Vice President and Chief Financial Officer, Finning International Inc.: Thank you, operator. Good morning, everyone, and welcome to Finning’s Q1 earnings call. Joining me on today’s call is Kevin Parkes, our President and CEO. Following our remarks, we will open the line to questions. This call is being webcast on the investor relations section of finning.com. We have also provided a set of slides on our website that we will reference, and an audio file of this call and the accompanying slides will be archived. Before I turn it over to Kevin, I want to remind everyone that some of the statements provided during this call are forward-looking. Please refer to slides 10 and 11 for important disclosures about forward-looking information as well as currency and specified financial measures, including non-GAAP financial measures.

Please note that forward-looking information is subject to risks, uncertainties, and other factors as discussed in our annual information form under key business risks and in our MD&A under Risk Factors and Management and Forward-Looking Information Disclaimer. Please treat this information with caution as our actual results could differ materially from current expectations. Unless otherwise noted, this presentation reflects the results of continuing operations only. Kevin, over to you.

Kevin Parkes, President and Chief Executive Officer, Finning International Inc.: Thank you, Dave. Good morning, everyone. Thank you for joining us, and thank you to our teams, our customers and Caterpillar for your hard work, support and partnership. Let me start with the headline. Finning is executing. We delivered our strongest Q1 adjusted EPS of CAD 1.02. Year-over-year product support grew for the eighth consecutive quarter, and we maintained our disciplined approach to cost and capital allocation. Most importantly, we continue to build the installed base and backlog in our operating regions, driving long-term product support opportunities and value. Helping our customers solve their toughest challenges and increase the performance from their investors is the foundation of what we do, which in turn helps build population, improve utilization, and increase product support opportunities. As with the last quarter, my prepared remarks will concentrate on the long term.

I’ll turn the call over to Dave, who will provide details on our results in the quarter. Please turn to slide 2. Momentum from 2025 carried into Q1. Revenue was CAD 2.5 billion, driven by strong product support growth, up 6% globally and 13% in Canada. Our mining business is a real strength. Over the past two years, we increased the Canadian large mining truck population by 25%. These assets operate in high intensity applications and create decades of product support opportunities. Mining in Chile moderated as expected, driven by a few of our large mining customers who are recalibrating their mining plans and equipment requirements. We are excited about mining in Argentina. Last week, I attended a very important mining conference in the San Juan province, and we are pleased to see investment starting to flow.

Backlog was up 32% year-over-year, up in all segments, most notably more than doubling in mining and power and energy in Canada. Sequentially, backlog is up 20% from December 31, 2025, up in all regions driven by Canada mining. I want to highlight our power and energy business. Backlog ended in the quarter at CAD 1.2 billion across prime power opportunity with customers where our penetration is high even in standby applications. It is also pleasing to see construction backlog building in all regions, with South America and the U.K. and Ireland both up more than 50% since the end of the year. Construction performance remains solid across all regions, despite the lack of any shovel-ready major projects. We are controlling what we can by expanding coverage and taking share. Rental discipline remains a real priority.

We are investing in our capabilities and capacity to support our growth. We will open two new branches in Canada this month alone and continue to make thoughtful investments in our inventory. Despite these targeted investments and higher LTIP expense on a trailing 12-month basis, our SG&A margin declined 60 basis points, evidencing our progress in optimizing our cost structure. Invested capital turns held at 2.3% as we continue to see further opportunity to optimize both cost and capital intensity. Maintaining a lower fixed cost base and turning our larger invested capital base with more velocity will support more resilient earnings and return on invested capital in the future. Turning to slide 3. Here we are illustrating the growth in ultra-class and large mining trucks across our Western Canada and South American regions since 2021.

As I commented earlier, a growing truck population is critical as a base for future product support revenue. You can see from the chart that truck population has consistently grown year-over-year, suggesting that that growth is influenced by a broader set of factors beyond mining production volumes and commodity prices. As customers evolve their brownfield operations, mining operations can move further away from the processing facilities. This, combined with, in some cases, with lower ore grades, can lead to opportunities for increased equipment requirements. We’re also seeing greenfield operations and contractors add to their fleet population. As you can see on the slide, since 2021, mining truck population in our Western Canada and South America regions has increased driver for product support growth. Of course, we remain committed to supporting our customers to lower their cost pe