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Linamar Corp. (TSE:LNR)
TSX:LNR
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Linamar
(TSX:LNR)
Rating:71Outperform
Price Target:
C$69.00
▲(3.06%Upside)
Positive Factors
Reshoring 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)
Market Cap
$4.00B
Dividend Yield1.73%
Average Volume (3M)99.83K
Price to Earnings (P/E)15.9
Beta (1Y)1.14
Revenue Growth2.26%
EPS Growth-54.00%
CountryCA
Employees32,000
SectorConsumer Cyclical
Sector Strength56
IndustryAuto - Parts
Share Statistics
EPS (TTM)2.76
Shares Outstanding59,809,586
10 Day Avg. Volume119,119
30 Day Avg. Volume99,834
Financial Highlights & Ratios
PEG Ratio2.46
Price to Book (P/B)0.81
Price to Sales (P/S)0.00
P/FCF Ratio87.25
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$63.51Price Target Upside-5.13% Downside
Rating ConsensusModerate Buy
Number of Analyst Covering4
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: 26.74%|
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
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.85
Very Positive
Balance Sheet
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.80
Positive
Cash Flow
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.78
Positive
| Breakdown | TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 10.66B | 10.58B | 9.73B | 7.92B | 6.54B | 5.82B |
| Gross Profit | 1.52B | 1.50B | 1.32B | 974.81M | 937.65M | 788.42M |
| EBITDA | 1.49B | 1.21B | 1.26B | 1.04B | 1.07B | 923.79M |
| Net Income | 594.93M | 258.26M | 503.05M | 426.19M | 420.56M | 279.13M |
Balance Sheet | ||||||
| Total Assets | 8.13B | 10.50B | 9.85B | 8.58B | 7.39B | 7.56B |
| Cash, Cash Equivalents and Short-Term Investments | 471.98M | 1.05B | 653.33M | 860.51M | 928.43M | 861.10M |
| Total Debt | 2.49B | 2.29B | 1.77B | 1.31B | 791.54M | 1.30B |
| Total Liabilities | 4.33B | 5.07B | 4.53B | 3.76B | 2.79B | 3.20B |
| Stockholders Equity | 3.80B | 5.43B | 5.32B | 4.81B | 4.60B | 4.35B |
Cash Flow | ||||||
| Free Cash Flow | 268.31M | 690.34M | 3.26M | 44.88M | 654.22M | 1.14B |
| Operating Cash Flow | 958.69M | 1.25B | 793.55M | 468.13M | 908.76M | 1.43B |
| Investing Cash Flow | -1.39B | -1.12B | -1.19B | -715.74M | -267.32M | -290.31M |
| Financing Cash Flow | 528.87M | 235.92M | 207.40M | 156.39M | -572.08M | -616.41M |
Linamar Technical Analysis
Positive
66.95
Price Trends
59.68
Positive
55.10
Positive
57.20
Positive
Market Momentum
1.37
Positive
70.06
Negative
84.70
Negative
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 66.95 is above the 20-day moving average (MA) of 63.53, above the 50-day MA of 59.68, and above the 200-day MA of 57.20, indicating a bullish trend. The MACD of 1.37 indicates Positive momentum. The RSI at 70.06 is Negative, neither overbought nor oversold. The STOCH value of 84.70 is Negative, 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 (61)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $265.51M | 10.06 | 6.86% | 6.06% | -2.84% | -8.22% | |
72 Outperform | $15.98B | 10.27 | 9.85% | 4.77% | 0.36% | 15.87% | |
71 Outperform | $4.00B | 15.86 | 4.66% | 1.73% | 2.26% | -54.00% | |
67 Neutral | C$640.53M | 5.65 | -3.98% | 2.27% | -9.36% | -145.18% | |
66 Neutral | C$2.15B | ― | -0.03% | ― | 15.99% | 99.83% | |
61 Neutral | C$5.24B | 10.94 | 18.94% | 3.79% | 5.08% | 6.52% | |
60 Neutral | C$929.26M | ― | -0.24% | 5.23% | 2.88% | 80.95% |
* Consumer Cyclical Sector Average
Performance Comparison
TSE:LNR
Linamar
66.95
2.96
4.62%
TSE:CAS
Cascades
9.18
0.58
6.76%
TSE:MRE
Martinrea International
8.80
-2.19
-19.90%
TSE:MG
Magna International
56.73
1.86
3.39%
TSE:XTC
Exco Technologies
7.01
-0.22
-3.00%
TSE:NFI
NFI Group Inc
18.49
2.02
12.26%
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.