Price targets have gone up for Alimentation Couche-Tard Inc. after the convenience store operator’s better-than-expected fiscal fourth quarter results that sent its shares rallying 4% on Wednesday.
Desjardins Securities raised its target to $74 target from $72 while reaffirming a “buy” rating. Canaccord Genuity’s target went to $78 from $70, with a “buy” rating maintained.
On Tuesday evening, Alimentation Couche-Tard reported adjusted EPS of 71 cents a share, well ahead of the 48 cents consensus expectation. Fuel and merchandise margins remained robust. Cost improvements were seen and company management said the acquisition environment in the sector is beginning to appear more favourable to frequent acquirors such as Couche-Tard.
“ATD’s solid 4Q results reaffirm our view that it is well-positioned to achieve attractive organic EPS growth of 10%+ in the longer term, with upside from M&A (robust pipeline and favourable valuation),” Desjardins Securities analyst Chris Li said in a note to clients. “While the shares are trading a touch above average (18.0x forward P/E vs 17.5x), we believe this is supported by earnings upside from higher fuel margins and acquisitions, and funds flow to staples, with torque to an economic recovery.”
Mr. Li believes the next catalyst for a further significant move in the stock could come on the company’s investor day on Oct. 11.
Canaccord analyst Derek Dley said that Couche-Tard “continues to fire on all cylinders.”
“Organic growth initiatives such as Couche-Tard’s Fresh Food, Fast program should be supportive of margin growth over the course of our forecast period, while fuel margins over the medium term should remain healthy. Furthermore, while we have not incorporated share buybacks into our estimate, we expect the company to be active with its NCIB over the next 12 months,” Mr. Dley said.
Elsewhere, BMO raised its price target to $75 from $70, National Bank to $74 from $71, and Stifel GMP to $76 from $74.