Scotiabank Q2/08 predictionThis is a prediction from Scotia,
We expect Q2 adjusted EPS to decline 14.6% to $0.50 from $0.59 a year ago.
consensus estimate is also $0.50.
Our forecast is predicated on same-store sales growth of 2% and a 60bp decline in the adjusted EBITDA margin rate.
Adjusted EBITDA is expected to decline 7.4%
to $394M.
We expect Q2 margins to be pressured by the pricing investments in hard
discount and superstores that were implemented in mid-2007 that have yet to
anniversary. Supply chain inefficiencies and consulting costs will also weigh
on profitability.
With restructuring benefits expected to emerge in the latter half of 2008, we
are forecasting ~5% EPS growth in 2H/08.
At 15.7x 2008E EPS, we believe Loblaw’s current valuation is full. As such, we reiterate our 3-Sector Underperform rating and our $30.50 one-year share price
target.
Ryan Balgopal, CFA