Stella-Jones (SJ) AI Stock Analysis

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Stella-Jones

(TSX:SJ)

Rating:78Outperform

Price Target:―

Stella-Jones scores a solid 78, reflecting its robust financial performance, particularly in cash flow generation and revenue growth. The technical indicators suggest a stable stock price with potential short-term fluctuations. The reasonable valuation and consistent dividend growth further support the stock's attractiveness. While there are minor challenges, such as a decline in utility pole volumes, the overall outlook remains positive due to the company's strong financial position and strategic initiatives.

Stella-Jones (SJ) vs. iShares MSCI Canada ETF (EWC)

Market Cap

$4.46B

Dividend Yield1.45%

Average Volume (3M)82.63K

Price to Earnings (P/E)13.6

Beta (1Y)0.50

Revenue Growth4.52%

EPS Growth0.51%

CountryCA

Employees3,000

SectorBasic Materials

Sector Strength73

IndustryPaper, Lumber & Forest Products

Share Statistics

EPS (TTM)1.67

Shares Outstanding55,359,770

10 Day Avg. Volume62,796

30 Day Avg. Volume82,630

Financial Highlights & Ratios

PEG Ratio2.41

Price to Book (P/B)2.22

Price to Sales (P/S)0.00

P/FCF Ratio13.95

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$85.33

Price Target Upside6.00% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering3

Stella-Jones Business Overview & Revenue Model

Company DescriptionStella-Jones Inc. produces and markets pressure-treated wood products in Canada and the United States. It offers railway ties and timbers for railroad operators; and wood utility poles for electrical utilities and telecommunication companies. The company also provides residential lumber and accessories to retailers for outdoor applications; industrial products, including bridge and crossing timbers, foundation and marine piling, construction timbers, crane mats, fence posts, and highway guardrail posts; and coal tar-based products. In addition, company manufactures wood preservative and creosote. Stella-Jones Inc. was incorporation in 1992 and is headquartered in Saint-Laurent, Canada.

How the Company Makes MoneyStella-Jones generates revenue through the manufacturing and sale of pressure-treated wood products. The company's primary revenue streams are the sale of utility poles and railway ties. Utility poles are integral to the telecommunications and electrical utility sectors, providing a steady demand for replacements and new installations. Railway ties are critical components for railway maintenance and expansion, ensuring a consistent need within the transportation sector. Stella-Jones also benefits from long-term supply agreements with key customers and partners, which provide a stable and predictable revenue base. Additionally, the company may engage in strategic acquisitions to enhance its product offerings and expand its market reach.

Stella-Jones Earnings Call Summary

Earnings Call Date:May 07, 2025

(Q1-2025)

% Change Since: 19.92%|

Next Earnings Date:Aug 07, 2025

Earnings Call Sentiment Neutral

The earnings call presented a mixed outlook. While Stella-Jones faces challenges in Railway Ties and weather-impacted Residential Lumber, it remains financially robust with strategic growth in the steel transmission market. The company is strategically positioned for future growth despite current headwinds.

Q1-2025 Updates

Positive Updates

Expansion into Steel Transmission Market

Stella-Jones announced its expansion into the steel transmission market, enhancing resilience and serving growing infrastructure needs. The acquisition of Lockwell provides access to a $5 billion annual sales market.

Solid Financial Position

Despite a 5% organic sales decline, Stella-Jones maintained a robust EBITDA margin above 18% and improved cash flow used in operating activities to $16 million from $62 million last year.

Successful Acquisition and Strategic Growth

Stella-Jones acquired Lockwell for $58 million, expanding its product offering into high voltage transmission with plans for a $15 million CapEx program to double Lockwell's capacity.

Negative Updates

Decrease in Railway Tie Sales

Railway Tie sales were down 14% organically due to a Class 1 customer treating more ties internally, resulting in anticipated lower sales from this customer.

Weather Impact on Residential Lumber

Challenging weather conditions led to slower volumes in Residential Lumber, with demand impacted by an unfavorable start to the home improvement season.

Company Guidance

During the first quarter of 2025, Stella-Jones maintained a solid financial position despite facing macroeconomic challenges. The company reported a slight organic sales decline of 5%, although it achieved a robust EBITDA margin of over 18%, excluding a 5% margin impact from an insurance settlement. Utility Poles generated $419 million in sales, marking a 4% volume decrease compared to Q1 2024, but benefiting from favorable pricing and currency impacts. Railway Ties sales dropped 14% organically, primarily due to a Class 1 customer handling more of their Railway Ties internally, while Residential Lumber sales remained stable at $88 million. The company anticipates stronger volume performance in the latter half of the year, driven by increased quoting requests and favorable contract pricing. Stella-Jones also announced its expansion into the steel transmission market with the acquisition of Lockwell, a move expected to enhance its presence in the high voltage transmission space and capitalize on a market exceeding $5 billion annually. The acquisition is anticipated to double Lockwell's capacity, with an additional $15 million investment planned to boost output and operational efficiencies. Stella-Jones ended the quarter with $700 million in available liquidity and a net debt-to-EBITDA ratio of 2.6, with plans to align the ratio within the target range by year-end.

Stella-Jones Financial Statement Overview

Summary

Stella-Jones exhibits strong financial health characterized by consistent revenue growth, solid profitability margins, and effective cash management. The company maintains a balanced approach to leverage and equity, enhancing its financial stability. Overall, Stella-Jones is in a strong financial position with positive growth trends and efficient operations.

Income Statement

Very Positive

Stella-Jones has demonstrated strong revenue growth with a 4.52% increase from 2023 to 2024. The company also maintains healthy profitability margins with a gross profit margin of 20.86% and a net profit margin of 9.19% in 2024. EBIT and EBITDA margins are strong at 14.50% and 18.24%, respectively, indicating efficient operational management.

Balance Sheet

Positive

The balance sheet reflects a stable capital structure with a debt-to-equity ratio of 0.88, indicating moderate leverage. The return on equity is solid at 16.44%, showcasing effective use of equity funds. The equity ratio of 47.31% suggests a well-balanced financing mix between debt and equity.

Cash Flow

Very Positive

Stella-Jones reported significant improvement in free cash flow, growing from negative in 2023 to a positive $265 million in 2024. The operating cash flow to net income ratio of 1.28 indicates robust cash generation relative to net income, and the free cash flow to net income ratio of 0.83 reflects efficient capital expenditures.

Breakdown	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	3.47B	3.32B	3.06B	2.75B	2.55B
Gross Profit	724.00M	688.00M	524.00M	456.00M	446.00M
EBITDA	633.00M	608.00M	448.00M	400.00M	385.00M
Net Income	319.00M	326.00M	241.00M	227.00M	210.00M
Balance Sheet
Total Assets	4.10B	3.71B	3.07B	2.67B	2.43B
Cash, Cash Equivalents and Short-Term Investments	50.00M	0.00	-167.00M	-144.00M	-139.00M
Total Debt	1.70B	1.61B	1.11B	878.00M	745.00M
Total Liabilities	2.16B	2.06B	1.52B	1.22B	1.05B
Stockholders Equity	1.94B	1.65B	1.56B	1.45B	1.37B
Cash Flow
Free Cash Flow	265.00M	-58.00M	147.00M	187.00M	123.00M
Operating Cash Flow	408.00M	107.00M	255.00M	251.00M	178.00M
Investing Cash Flow	-137.00M	-258.00M	-154.00M	-193.00M	-54.00M
Financing Cash Flow	-221.00M	151.00M	-101.00M	-58.00M	-124.00M

Stella-Jones Technical Analysis

Technical Analysis Sentiment

Positive

Last Price80.50

Price Trends

50DMA

77.70

Positive

100DMA

72.50

Positive

200DMA

73.06

Positive

Market Momentum

MACD

1.08

Positive

RSI

55.97

Neutral

STOCH

59.12

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:SJ, the sentiment is Positive. The current price of 80.5 is above the 20-day moving average (MA) of 80.04, above the 50-day MA of 77.70, and above the 200-day MA of 73.06, indicating a bullish trend. The MACD of 1.08 indicates Positive momentum. The RSI at 55.97 is Neutral, neither overbought nor oversold. The STOCH value of 59.12 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:SJ.

Stella-Jones Peers Comparison

Overall Rating

UnderperformOutperform

Sector (63)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SJ	78 Outperform	$4.46B	13.62	18.06%	1.45%	4.52%	0.51%
Sector *	63 Neutral	$10.49B	9.49	1.49%	2.70%	2.28%	-33.88%
WFG	―	$5.59B	6,251.67	-1.80%	0.02%	―	―
ADN	75 Outperform	C$326.64M	16.46	5.85%	8.10%	12.30%	-36.60%
WEF	52 Neutral	C$125.11M	―	-1.51%	―	9.47%	85.29%
IFSPF	―	$494.25M	―	-16.90%	―	―	―
CFPZF	―	$1.23B	―	-18.19%	―	―	―

* Basic Materials Sector Average

Performance Comparison

TSE:SJ

Stella-Jones

80.50

-13.93

-14.76%

WFG

West Fraser Timber Co

70.95

-15.53

-17.96%

TSE:ADN

Acadian Timber

18.27

1.24

7.28%

TSE:WEF

Western Forest Prod

0.42

0.00

0.00%

IFSPF

Interfor

9.61

-3.00

-23.79%

CFPZF

Canfor

10.32

-0.74

-6.69%

Stella-Jones Corporate Events

DividendsBusiness Operations and StrategyFinancial Disclosures

Stella-Jones Reports Strong 2024 Financial Results and Increases Dividend

Positive

Feb 27, 2025

Stella-Jones Inc. reported a 5% increase in annual sales to $3,469 million and an EBITDA margin of 18.2% for the year ending December 31, 2024. Despite softer market demand for utility poles, the company maintained strong operating cash flows and increased its quarterly dividend by 11%, reaffirming its financial objectives for 2023-2025. Looking forward to 2025, Stella-Jones aims to capitalize on the need to strengthen North America’s electrical grid and expand its offerings to infrastructure customers, focusing on optimizing its operating model and maintaining a healthy EBITDA margin to enhance shareholder value.

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.Date of analysis: Apr 30, 2025