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What to do with Couche-Tard, Cargojet and Suncor stocks? Here are some analyst recommendations that prices are likely to move in the near future. Note: The author may have a completely different opinion from the one expressed.
Alimentation Couche-Tard (ATD, $53.30): A less spectacular fourth quarter on the horizon
It’s Canaccord Genuity’s Derek Dley to present his expectations for the fourth quarter of fiscal 2022, which will be announced after market close on June 28. The conference call will take place the next morning.
The analyst is more cautious than his peers as the results are compared to the pandemic recovery quarter a year earlier. Gasoline margins at the pump will also be slightly less robust than a year ago.
Overall, the post-pandemic return to normal is continuing, leading to increases in car trips, visits to convenience stores, and purchases of fresh groceries and other items intended for impulse purchases.
As a result, Derek Dley is forecasting a 5% decline in operating income (to $1.02 billion) and a 9.6% decline in earnings per share (to $0.47).
The analyst expects a modest 1 percent increase in fuel sales in the United States, Canada and Europe. However, he notes that those volumes are still 9% to 18% below pre-pandemic 2019 levels, depending on the market.
Couche-Tard’s gasoline margins at the pump continue to outperform the industry thanks to efficient supply and a lack of price wars, but U.S. margins are expected to have fallen by 34.5 to 33 cents a gallon for a year .
In terms of convenience store performance, Derek Dley believes Couche-Tard will continue the momentum of the third quarter thanks to its fresh food, fast food and beverage programs, particularly in the United States and Europe. He therefore expects sales to increase by 3% at comparable convenience stores in the three markets.
The expanded fresh food, single-serve and beverage offerings will help Couche-Tard offset cost inflation and the cost of integrating the Hong Kong convenience store group into the European organization. It therefore expects an operating margin improvement of 30 percentage points in all markets, ie 32.1% in the United States, 31.3% in Canada and 38.4% in Europe.
While awaiting the results and the conference call, Derek Dley remains unchanged on his price target of $61 and reiterates his Buy rating.
Couche-Tard’s stock price has been steady year-to-date, compared to the nearly 10% decline in the S&P/TSX index.
Cargojet (CJT, $135.83): Airline valuations have rarely been so attractive