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Stella-Jones Inc (TSE:SJ)
TSX:SJ
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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)

Stella-Jones Business Overview & Revenue Model

Company DescriptionStella-Jones Inc. is a leading North American manufacturer and distributor of industrial wood products. The company operates primarily in two sectors: utility poles and railway ties. Stella-Jones produces pressure-treated wood products, which are essential for infrastructure and construction projects across North America. Their core products include utility poles, railway ties, and other related wood products, serving industries such as telecommunications, electrical utilities, and railroads.
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: 18.16%|
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
85
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
78
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
92
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.
BreakdownDec 2024Dec 2023Dec 2022Dec 2021Dec 2020
Income Statement
Total Revenue3.47B3.32B3.06B2.75B2.55B
Gross Profit724.00M688.00M524.00M456.00M446.00M
EBITDA633.00M608.00M448.00M400.00M385.00M
Net Income319.00M326.00M241.00M227.00M210.00M
Balance Sheet
Total Assets4.10B3.71B3.07B2.67B2.43B
Cash, Cash Equivalents and Short-Term Investments50.00M0.00-167.00M-144.00M-139.00M
Total Debt1.70B1.61B1.11B878.00M745.00M
Total Liabilities2.16B2.06B1.52B1.22B1.05B
Stockholders Equity1.94B1.65B1.56B1.45B1.37B
Cash Flow
Free Cash Flow265.00M-58.00M147.00M187.00M123.00M
Operating Cash Flow408.00M107.00M255.00M251.00M178.00M
Investing Cash Flow-137.00M-258.00M-154.00M-193.00M-54.00M
Financing Cash Flow-221.00M151.00M-101.00M-58.00M-124.00M

Stella-Jones Technical Analysis

Technical Analysis Sentiment
Positive
Last Price79.32
Price Trends
50DMA
76.64
Positive
100DMA
71.84
Positive
200DMA
73.32
Positive
Market Momentum
MACD
1.25
Positive
RSI
54.35
Neutral
STOCH
39.84
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 79.32 is above the 20-day moving average (MA) of 78.68, above the 50-day MA of 76.64, and above the 200-day MA of 73.32, indicating a bullish trend. The MACD of 1.25 indicates Positive momentum. The RSI at 54.35 is Neutral, neither overbought nor oversold. The STOCH value of 39.84 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 (44)
Financial Indicators
Name
Overall Rating
Market Cap
P/E Ratio
ROE
Dividend Yield
Revenue Growth
EPS Growth
TSSJ
78
Outperform
$4.41B13.3518.06%1.56%4.52%0.51%
TSADN
75
Outperform
C$323.40M16.305.85%6.47%12.30%-36.60%
TSCFP
53
Neutral
$1.71B-18.19%-2.51%-157.38%
TSCFF
48
Neutral
C$13.25M-24.89%-7.32%10.08%
44
Neutral
C$967.00M-6.65-13.73%2.47%17.55%-32.57%
TSIFP
42
Neutral
C$676.62M-16.90%-10.70%10.74%
* Basic Materials Sector Average
Performance Comparison
Ticker
Company Name
Price
Change
% Change
TSE:SJ
Stella-Jones
81.12
-10.94
-11.88%
TSE:IFP
Interfor
13.15
-3.30
-20.06%
TSE:CFP
Canfor
14.59
-0.21
-1.42%
TSE:CFF
Conifex Timber
0.32
-0.09
-21.95%
TSE:ADN
Acadian Timber
17.95
1.76
10.87%

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