Alimentation Couche-Tard Inc T.ATD

Alternate Symbol(s): ANCTF

Consumer Defensive Grocery Stores

Alimentation Couche-Tard Inc. is engaged in convenience and mobility, operating in about 29 countries and territories, with more than 16,700 stores, of which almost 13,100 offer road transportation fuel. With its Couche-Tard and Circle K banners, the Company is an independent convenience store operator in the United States, and it is engaged in the convenience store industry and road transportation fuel retail in Canada, Scandinavia, the Baltics, as well as in Ireland. It also has a presence in Poland, Hong Kong Special Administrative Region of the People's Republic of China, Belgium, Germany, Luxembourg, and the Netherlands. Its North American network consists of about 17 business units, including 14 in the United States covering 47 states and three in Canada covering all 10 provinces. In Europe, it operates a broad retail network across Scandinavia, Ireland, Poland, and the Baltics through seven business units. Its operating brands include Circle K, Couche-Tard, and Ingo.

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Alimentation Couche-Tard Inc

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Post by retiredcfon Jun 22, 2022 11:18am

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Post# 34774014

TD

Have a $62.00 target. GLTA

Alimentation Couche-Tard Inc.

(ATD-T) C$53.50

Fuel Margins Look Strong for Q4/F22 Event

ATD will report Q4/F22 results on June 28 after markets close. We now expect adjusted EPS (f.d.) of $0.60 (up from $0.47 on higher U.S. fuel margin assumptions of $0.44/gal vs. $0.360/$0.353 previously/last year) vs. $0.52 last year. Consensus is now $0.51 (range: $0.35-$0.65), though we believe that it will move higher.
Beyond Q4/F22, we have updated our EBITDA forecasts to reflect new currency and fuel volume/margin assumptions, though our annual EPS estimates are unchanged. We will adjust for the extra week in F2023 following the results.

Impact: NEUTRAL

We forecast a 9%/15% y/y increase in adjusted EBITDA/EPS in Q4/F22, mostly on y/y improvements in U.S. fuel margins, fuel SSV in Canada/Europe, and in-store mix (all geographies), partly offset by lower U.S. fuel SSV, higher credit-card fees, and opex recovery/inflation.

We see SSS growth from the expanding fresh food offer, consumer behaviour returning to immediate consumption, and data-driven analytics that deliver effective promotional strategies and price optimization (without hurting traffic). We forecast SSSG of +1.7%/+2.0%/+8.4% in the U.S./Canada/Europe.
Record pump prices appear to have curtailed the demand recovery, with U.S. SSV of -1.0% expected (11% below pre-pandemic levels). Canada and Europe are expected to grow. Considering the continuing work-from-home trend, we do not expect much demand growth over the next few years, barring a material reduction in fuel prices. Margins have been making up for the lower volumes and the rapid opex inflation, which should continue as long as competition remains rational.
SG&A is forecast to rise 12% y/y (15% constant currency) on higher credit- card fees, a recovery in promo spending and labour hours, employee retention programs, and lapping last year's $41mm CEWS benefit.

TD Investment Conclusion

Following the share-price pullback, valuation looks more attractive (15.2x/15.6x TD/ consensus NTM EPS versus its long-term average of ~17.0x-17.5x). That said, beyond Q4/F22, we do not see earnings being a material near-term catalyst as the comps get more difficult in F2023. Consequently, the stock is likely to be influenced more by market factors in the short term, unless ATD puts its >$10bln of acquisition capacity to use for accretive acquisitions; in the interim, ATD is planning to buy ~1.5mm of its own shares per week.