Bullboard - Stock Discussion Forum Parkland Corp T.PKI

Alternate Symbol(s): PKIUF

Parkland Corporation is an international fuel distributor, marketer and convenience retailer with operations in 26 countries across the Americas. The Company’s segments include Canada, International, USA and Refining. Its retail network meets the fuel and convenience needs of everyday consumers. It also provides a range of choices to help them lower their environmental impact. These include... see more

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Parkland Corp > Scotia comments on result

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Post by incomedreamer11 on Oct 31, 2024 9:20am

Scotia comments on result

Q3 Miss on Refinery; Fuel Volume Disappoints; Guide Cut Implies Q4 Miss

OUR TAKE: Negative. We expect PKI shares to be under pressure following a 20% miss from estimates one month ago, and a 6% miss from revised estimates. First, the headline miss is on lower refining margins, but fuel volume continues to disappoint as well, not only against expectations, but also on a y/y basis too. Whether the decline in fuel volume is cyclical or structural, it’s not helping PKI’s case that its business is ratable. Partially offsetting was sequential fuel margin expansion in Canada and the U.S. Second, while another cut to guidance isn’t surprising, the magnitude is steep, and implies a 12% miss in Q4 too. Specifically, PKI now expects $1.70B to $1.75B in ‘24 EBITDA vs. a mid-point of $1.95B previously. Third, leverage deteriorated to 3.4x vs. 3.1x q/q, which makes achieving the lower end of 2x to 3x by the end of ‘25 challenging. Fourth, a little context. PKI’s core business ex. Refining has grown TTM EBITDA by 2% y/y to $1.57B. If we normalize Refinery EBITDA to ~$450M, PKI’s run-rate EBITDA exceeds $2B, in line with PKI’s original guide of $1.95B to $2.05B. Either way, a very tough quarter for investors to swallow. Thesis review to follow.

Canada. Vol -7% y/y (and missed the Street by 3%); fuel margins of 10.7 cpl vs. 9.8 q/q beat the Street; C-Store SSSG (ex cigs) was -1.1%. C-Store margins improved slightly to 34.9% vs. 34.8% q/q. Inflation continues to pressure discretionary spending.
U.S. Vol -9% y/y (and missed the Street by 4%); fuel margins improved to 9 cpl vs. 8.2 q/q. While consumer demand for retail gas was lower, PKI’s supply optimization initiatives partially offset; C-store SSSG (ex cigs) was -3.5%, and store margins slipped to 33.0% from 33.3% q/q.
Int’l. Vol -18% y/y (and missed Street by 11%); fuel margins fell to 12.4 cpl vs. 13.3 q/q. Margins declined on the back of lower wholesale volume, despite growth in the retail, commercial, and aviation base businesses.
Refining. Vol -7% y/y; (and missed Street by 7%). Parkland still expects a composite utilization of 75% to 80% in ‘24 for the refinery.
Notables. (1) TTM FCF is now $3.58/share a 16% decrease y/y. PKI now expects ‘24 to land around $3.75/sh, down from $5.00; (2) PKI repurchased 382k shares for $14M under its NCIB; (3) leverage deteriorated to 3.4x from 3.1x, due to the drop in TTM EBITDA; (4) assets held for sale spiked to ~$1.1B with liabilities of $350M, and which now include the Florida assets. This implies $750M of net assets available for sale vs. $500M previously outlined. Could this remove ~$100M of run-rate EBITDA from the portfolio?