Ahead of the Sept. 6 release of its first-quarter fiscal 2024 results, RBC Dominion Securities analyst Irene Nattel reaffirmed Alimentation Couche-Tard Inc. (
) as her “best idea” through the remainder of the calendar year, seeing it moving “from seed to harvest on key organic growth initiatives, with strong FCF [free cash flow] and clean B/S [book-to-sales] providing upside optionality, notably around M&A.”
“Against the backdrop of elevated rates, consumer wallet pressure and growing economic uncertainty, we favour staples/staples-like names that perform across the cycle and that enjoy stock-specific optionality,” she said. “Favourable longer-term outlook on ATD predicated on: 1. sustainable fuel margins close to 40¢/g; 2. rising share of wallet inside the box, and 3. value-creation from untapped B/S capacity, both M&A and NCIB.”
Seeing “resilient” consumer activity through the quarter, Ms. Nattel is forecasting EBITDA and earnings per share of $1.366-billion and 75 cents, largely in-line with the consensus projections of $1.366-billion and 75 cents.
“Incorporating latest reads on fuel margins, FX, and fuel prices and tweaking assumptions around SSS [same-store sales], GM% and SSG [same-store sales growth] leaves our forecasts broadly unchanged ahead of FQ1,” she said.
Ms. Nattel kept an “outperform” rating and $87 target. The current average is $79.05.
Elsewhere, BMO’s Tamy Chen raised her quarterly EPS projection to 77 cents from 69 cents, keeping an “outperform” rating and $75 target.
“The largest factor behind the increase is a higher U.S. fuel margin based on the quarter-over-quarter trend in industry data,” she said. “In addition, we lowered our SG&A expense after incorporating our estimates for electronic payment fees and FX rates during the quarter. Lastly, we nudged up our U.S. merchandise comp, primarily based on IRI data.”
“We believe the company continues to have several growth opportunities going forward, including the fuel rebrand initiative, improving the profitability of the fresh food program, and the global M&A roll-up element where we believe there remains significant opportunities in Asia and Europe.”