Citing the likely impact of warmer-than-expected winter conditions, Raymond James analyst Steve Hansen downgraded Superior Plus Corp. (SPB-T) to “market perform” from “outperform” previously.
“Balmy winter weather is expected to weigh on SPB’s 4Q23 volumes as the effects of El Nino drive near-record warmth across much of North America,” he said. “In Canada, specifically, Oct & Nov degree days came in 3 per cent warmer vs. 2022 and 8 per cent warmer vs. the 5-yearr average, while Eastern U.S, degree days were consistent vs. 2022 and 5 per cent warmer vs. the five-year average. Preliminary December data also supports warmer year-over-year temps. Looking into 1Q24, recent industry projections call for a continuation of mild weather through the balance of winter, further exacerbating near-term demand concerns.”
“Notwithstanding the aforementioned headwinds, we remain keen to hear more regarding SPB’s new long-term strategic priorities. As referenced last quarter, the company’s new management team (CEO, CFO) revealed its intention to release new long-term targets underpinned by an attractive (shareholder-friendly) basket of key priorities, including: 1) organic growth (Certarus, propane); 2) balance sheet deleveraging; 3) share repurchases (NCIB renewal announced LQ); and 4) dividend support.”
Mr. Hansen trimmed his target for Superior Plus shares by $1 to $11.50. The average is currently $13.15.
“While we continue to admire the firm’s revitalized organic growth prospects (anchored by its new Certarus platform) and renewed focus on platform optimization & balance sheet discipline, we feel the risk-reward scenario is more balanced near-term, hence our tactical decision to move to the sidelines,” he said.