DesjardinsLots of readers but seem to be talking to myself here. GLTA
Ahead of the release of its fourth-quarter 2023 financial results after the bell on Tuesday, Desjardins Securities analyst Chris Li raised his revenue and earnings forecast for Alimentation Couche-Tard Inc. through fiscal 2024.
“While we do not necessarily expect 4Q results to be a catalyst due to tough year-ago comps for fuel margins, potentially softer consumer spending and high near-term SG&A expenses, we believe the investor day in October could be a catalyst by reaffirming attractive long-term growth targets (organic and M&A), supported by strong FCF and the balance sheet,” he said. “Valuation is in line with the average forward P/E of 17 times, supported by potential funds flow to staples, with torque to an economic recovery next year.”
For the quarter, Mr. Li is now forecasting revenue of US$16.777-billion, up from US$16.435-billion a year ago and above the Street’s projection of US$16.133-billion. His adjusted earnings per share estimate of 47 US cents is a decline of 8 US cents year-over-year and 2 US cents under the consensus.
“We believe the focus will be on the U.S. given concerns about softening consumer spending,” he said. “Recent results from peers have been mixed. On the one hand, 7-Eleven USA’s merchandise SSSG [same-store sales growth] has decelerated from mid-single digits in the beginning of the year to approximately 2 per cent in recent months. On the other hand, solid results from CASY, MUSA and ARKO suggest the c-store business remains resilient, supported by its convenience nature and foodservice. We believe ATD is benefiting from the strong momentum of Fresh Food, Fast, with SSSG of 23 per cent in 3Q FY23. The recently launched US$5 pizza and fresh-baked cookie programs are doing well, partly offset by continued softness in tobacco. We expect largely stable merchandise gross margins in all geographies.”
“We expect continued work-from-home trends and fuel-rebranding activities to weigh on [fuel] volumes, especially in the U.S. (10 per cent below pre-pandemic levels). We expect continued strength in fuel margins, especially in the U.S., to mitigate softness in fuel volume. We are forecasting US37 cents per gallon (in line with OPIS) and meaningfully higher levels vs before the pandemic.”
Updating his estimates to also reflect its recently announced acquisition of 2,193 retail sites from TotalEnergies, Mr. Li raised his 2023 and 2024 earnings per share projections to $2.89 from $2.79 and $2.81, respectively.
He kept a “buy” rating and $72 target. The average is currently $74.74.
“Our positive view is based on attractive growth (organic and M&A) supported by a strong financial position,” said Mr. Li.