Revised Targets After better-than-expected first-quarter results, including “strong” same-store sales growth of 22.8 per cent and margin expansion, Stifel analyst Martin Landry sees Pet Valu Holdings Ltd.’s momentum continuing into the current quarter.
“According to management, demand remained strong in Q2/22 despite a low promotional environment and continued price inflation across all product segments,” he said in a research note titled That is a healthy PET. “The company is seeing strong growth across all categories from consumables to hard lines. PET benefits from 2/3rd of its SKUs being staples oriented, which creates recurring traffic, helping to navigate the difficult macroeconomic environment. These comments suggest that demand is rather inelasticity supporting our view about the industry being defensive.”
Mr. Landry increased his 2022 revenue forecast by 2 per cent to reflect the company’s momentum, which includes a loyalty program showing notable growth, and “strong growth prospects.” His full-year earnings per share projection is now $1.50, up from $1.42 previously.
“We see upside potential to our estimates as PET continues to outperform both our estimates and consensus driven by continued strong same-store sales growth that as averaged over 13 per cent over the past 3 years,” he said.
However, the analyst cut his target for Pet Valu shares to $42 from $44 “to reflect the general contraction in public equity valuations seen recently.” The average on the Street is $41.
Elsewhere, National Bank Financial’s Vishal Shreedhar raised his target by $1 to $38 with a “sector perform” rating.
“We continue to remain on the sidelines given moderating EBITDA growth through 2022. In addition, for now, we see better value elsewhere in our discretionary coverage universe,” he said.