June 23, 2022

Morning Report: A convenient place to hide from oil market volatility?

Today we revisit global convenience store operator Alimentation Couche-Tard (ATD) which has claimed the 30th spot in our June Top Energy report. ATD is up 15.8% since we last featured it here on July 8th, 2021, setting a 52-week high of $59.60 on May 2nd. That lags the INK Canadian Insider Index over the same period (up 21.2%), but it is ahead of the S&P 500, down 13.0%.

When we last reported on ATD, we noted that its margins could benefit during periods of falling oil prices. While oil prices were already rising early in the year ahead of the outbreak of hostilities in Ukraine, ATD has been able to make rising oil prices work for them. When they reported fiscal Q3 (ended January 30th) results on March 15th, revenue came in at US$4.79 billion, up from US$4.53 billion in Q3 2021. ATD reported net earnings of US$0.70 per share, up from US$0.55 in the comparable period. Importantly, road transportation fuel gross margin grew in both the US and Canada which ATD attributes to favourable market conditions and supply chain optimizations. We will get an opportunity to see if ATD has continued to make volatile petroleum prices work for their bottom line when the company reports fiscal Q4 results after the close on June 28th.

While insiders were net sellers near the 52-week high, we have also seen some insiders accumulating shares. In addition, ATD has been buying back shares and has a relatively attractive trailing 12-months price-to-sales ratio of 0.7.