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Linamar Corp. (TSE:LNR)
TSX:LNR

Linamar (LNR) AI Stock Analysis

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Linamar

(TSX:LNR)

Rating:71Outperform
Price Target:
C$69.00
▲(11.04%Upside)
Linamar's strong revenue growth and solid balance sheet are significant strengths, although recent profitability pressures and market challenges pose risks. The technical indicators suggest upward momentum but indicate potential overbought conditions. The valuation appears reasonable, and the company's focus on shareholder returns is positive. However, the sales decline and tariff concerns noted in the earnings call could impact future performance.
Positive Factors
Manufacturing Opportunities
Linamar Corp is seeing inquiries from OEMs about reshoring parts, which is viewed as an incremental opportunity for North American manufacturing.
Revenue Growth
Linamar Corp's Mobility segment expects to see revenue growth, even as industry forecasts have been cut.
Share Buyback
Linamar Corp's share buyback is continuing while balancing reinvestment in the business, unlike some peers who have paused their buybacks.
Negative Factors
European Asset Impairment
A $389mm impairment was recognized on European assets due to structural challenges in the region.
Industrial Segment Outlook
The industrial segment's outlook has worsened with a 'double-digit' sales decline expected in 2025.
Tariff Uncertainty
The share price upside is likely to be limited until there is clarity on the tariff outlook for the Mobility segment.

Linamar (LNR) vs. iShares MSCI Canada ETF (EWC)

Linamar Business Overview & Revenue Model

Company DescriptionLinamar Corporation (LNR) is a diversified global manufacturing company headquartered in Guelph, Ontario, Canada. It operates in two main sectors: the Transportation segment and the Industrial segment. The company is renowned for its precision machining expertise, providing powertrain systems and components for the automotive and commercial vehicle markets. In addition to its automotive focus, Linamar also produces advanced products for the agricultural and energy industries through its Industrial segment, including access equipment and agricultural machinery.
How the Company Makes MoneyLinamar makes money through a multifaceted revenue model that capitalizes on its diversified product offerings across the Transportation and Industrial segments. In the Transportation segment, Linamar generates revenue by manufacturing and supplying precision-machined components and systems for automotive powertrains, such as engines, transmissions, driveline systems, and other critical components. This stream is driven by long-term contracts with major automotive manufacturers and is influenced by global automotive production trends. In the Industrial segment, Linamar earns revenue by producing and selling access equipment like aerial work platforms and telehandlers, along with agricultural machinery. Strategic partnerships, technological innovation, and a focus on efficiency and quality contribute significantly to Linamar's earnings, allowing the company to maintain competitive pricing and strong relationships with original equipment manufacturers (OEMs) and other clients.

Linamar Earnings Call Summary

Earnings Call Date:May 07, 2025
(Q1-2025)
|
% Change Since: 17.63%|
Next Earnings Date:Aug 13, 2025
Earnings Call Sentiment Neutral
Linamar delivered earnings and margin growth despite sales declines in challenging markets. The company maintained a strong balance sheet and continued to return cash to shareholders. However, significant sales declines in its key segments and ongoing tariff concerns posed challenges.
Q1-2025 Updates
Positive Updates
Earnings and Margin Growth
Despite down markets in both segments, Linamar achieved earnings growth and margin improvement, reaching a target operating earnings margin of 10% for the quarter.
Strong Balance Sheet
Net debt to EBITDA was maintained at an excellent level of 1.04, with continued positive free cash flow of $76.4 million, keeping the balance sheet strong and liquidity high.
Shareholder Returns
The company continued repurchasing shares and announced an increase in its dividend, further returning cash to shareholders.
Market Share Growth
Linamar achieved market share growth in both segments, offsetting declining traditional volumes in a challenging market environment.
Negative Updates
Sales Decline
Sales decreased by 7% to $2.5 billion, with significant declines in both the Industrial segment (down 13%) and Mobility segment (down 5%) due to soft market conditions.
Access Equipment Industry Decline
The access equipment market saw a decline of 34% globally, with significant impacts in North America and Asia Pacific, affecting Linamar's sales in this segment.
Agricultural Industry Challenges
The North American large agriculture market experienced a multi-year down cycle, with combined retails down 46% and high horsepower tractors down 19%.
Continued Tariff Concerns
Ongoing concerns about tariffs impacting automaker customers, with significant costs potentially affecting vehicle pricing and demand.
Company Guidance
In the Linamar Q1 2025 earnings call, the company reported a challenging yet successful quarter, with several key metrics highlighting their performance. Sales reached $2.5 billion, although this was a 7% decline compared to last year, with significant market pressures particularly affecting the Industrial segment, which saw a 13% sales drop. Despite this, Linamar delivered normalized net earnings of $167.2 million, marking a 5% increase, driven by operational efficiencies and cost reductions. The company maintained a strong balance sheet with net debt to EBITDA at 1.04, below their target of 1.5x, and generated positive free cash flow of $76.4 million. Normalized earnings per share (EPS) increased by 6.6% to $2.76. Linamar also continued its share repurchase program, buying back nearly 1.8 million shares, reflecting an ongoing commitment to returning cash to shareholders. The company emphasized its adaptability and strategic investments in flexible equipment, which allowed them to manage capital expenditures efficiently, aiding in maintaining growth momentum despite market challenges.

Linamar Financial Statement Overview

Summary
Linamar's financial health is strong with significant revenue growth and a solid balance sheet. While profitability margins have faced some pressure recently, the company maintains a healthy cash flow generation. Continued focus on operational efficiency and profitability improvement will be key for sustaining long-term financial performance.
Income Statement
85
Very Positive
Linamar has shown a strong revenue growth trajectory with TTM revenue reaching approximately CAD 10.39 billion, up from CAD 7.92 billion in 2022. The gross profit margin remains healthy at around 14.56% in TTM. However, the EBIT margin has slightly decreased to 5.85% in TTM from 7.74% in 2023, reflecting some operational efficiency challenges. The net profit margin has also declined from 5.17% in 2023 to 2.48% in TTM, indicating potential pressures on profitability.
Balance Sheet
80
Positive
The balance sheet is robust with a debt-to-equity ratio of 0.39 in TTM, indicating prudent leverage management. The equity ratio stands strong at 52.84%, showing a solid equity base relative to total assets. The return on equity (ROE) is relatively low at 4.56% in TTM, suggesting room for improvement in generating returns on equity.
Cash Flow
78
Positive
The cash flow statements show positive trends with a solid free cash flow of CAD 780 million in TTM, reflecting a 13% growth from 2024. The operating cash flow to net income ratio is favorable at 4.82, indicating strong cash generation relative to earnings. However, the free cash flow to net income ratio has decreased to 3.03, reflecting potential challenges in free cash flow conversion.
Breakdown
TTMDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income StatementTotal Revenue
10.39B10.58B9.73B7.92B6.54B5.82B
Gross Profit
1.51B1.50B1.32B974.81M937.65M788.42M
EBIT
608.40M611.33M774.82M594.83M601.23M424.19M
EBITDA
1.22B1.21B1.26B1.04B1.07B923.79M
Net Income Common Stockholders
257.45M258.26M503.05M426.19M420.56M279.13M
Balance SheetCash, Cash Equivalents and Short-Term Investments
671.90M1.05B653.33M860.51M928.43M861.10M
Total Assets
7.33B10.50B9.85B8.58B7.39B7.56B
Total Debt
980.83M2.29B1.77B1.31B791.54M1.30B
Net Debt
308.93M1.24B1.12B447.86M-136.88M442.11M
Total Liabilities
2.92B5.07B4.53B3.76B2.79B3.20B
Stockholders Equity
4.40B5.43B5.32B4.81B4.60B4.35B
Cash FlowFree Cash Flow
780.19M690.34M3.26M44.88M654.22M1.14B
Operating Cash Flow
1.24B1.25B793.55M468.13M908.76M1.43B
Investing Cash Flow
-397.77M-1.12B-1.19B-715.74M-267.32M-290.31M
Financing Cash Flow
-781.22M235.92M207.40M156.39M-572.08M-616.41M

Linamar Technical Analysis

Technical Analysis Sentiment
Positive
Last Price62.14
Price Trends
50DMA
54.55
Positive
100DMA
53.95
Positive
200DMA
56.96
Positive
Market Momentum
MACD
2.04
Positive
RSI
61.50
Neutral
STOCH
34.19
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:LNR, the sentiment is Positive. The current price of 62.14 is above the 20-day moving average (MA) of 61.81, above the 50-day MA of 54.55, and above the 200-day MA of 56.96, indicating a bullish trend. The MACD of 2.04 indicates Positive momentum. The RSI at 61.50 is Neutral, neither overbought nor oversold. The STOCH value of 34.19 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:LNR.

Linamar Peers Comparison

Overall Rating
UnderperformOutperform
Sector (62)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
TSXTC
79
Outperform
$255.55M9.686.86%6.17%-2.84%-8.22%
TSMG
73
Outperform
$14.13B9.089.85%5.25%0.36%15.87%
TSLNR
71
Outperform
$3.72B14.734.66%1.65%2.26%-54.00%
TSMRE
66
Neutral
$609.96M5.65-3.98%2.35%-9.36%-145.18%
62
Neutral
$6.88B11.322.90%3.87%2.70%-24.57%
TSCAS
59
Neutral
$919.14M-0.24%5.21%2.88%80.95%
TSNFI
59
Neutral
C$1.83B-0.03%15.99%99.83%
* Consumer Cyclical Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
TSE:LNR
Linamar
61.98
-5.51
-8.16%
TSE:CAS
Cascades
9.21
0.31
3.44%
TSE:MRE
Martinrea International
8.49
-3.02
-26.26%
TSE:MG
Magna International
50.99
-5.40
-9.58%
TSE:XTC
Exco Technologies
6.70
-0.67
-9.10%
TSE:NFI
NFI Group Inc
15.36
-1.17
-7.08%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.