What to do with the titles of Couche-Tard, Neo Performance Materials and George Weston? Here are some recommendations from analysts likely to move prices in the near future. Note: the author may have a totally different opinion from that expressed.
Alimentation Couche-Tard (ATD.B, $ 38.51): what to expect in the third trimester?
Alimentation Couche-Tard will release its third quarter results on March 17.
Irene Nattel of RBC Capital Markets expects a solid 15.3% increase in operating income to US $ 1.38 billion and 16.4% in earnings to US $ 0.60 per share.
This forecast sits at the top of the US $ 0.43-0.62 range for all analysts.
The global convenience store operator is expected to have benefited from good in-store tobacco, beverage and grocery sales. Margins on gasoline at the pump are also expected to be high enough to counter the decline in volumes sold while spending other than those imposed by COVID-19 remains under control.
Aid checks sent out by governments should also have boosted consumer spending, she said.
Over the medium term, the expanded fresh food offering in 75% of Circle K convenience stores by 2022 is expected to improve same-store sales and margins.
Couche-Tard is also converting 500 other gas stations this year to the Circle K brand. Only a quarter of establishments (2,600) have adopted this brand. Brand awareness increases customer loyalty, to whom Circle K then offers to purchase premium, more profitable fuel, she explains.
Irene Nattel estimates that every one cent change in the gasoline pump margin for all regions has an impact of $ 2 on the target price.
Couche-Tard stock has never recovered from the unexpected offer for French grocer Carrefour SA in January despite the company’s efforts to assure its shareholders that its strategy of targeted and profitable acquisitions is intact, acknowledges the analyst.
Internal growth and the return of shareholder confidence in Couche-Tard’s strategy are the two catalysts for the stock to recover for the better, in his eyes.
In the meantime, Couche-Tard has repurchased $ 656 million or 1.5% of its shares since November 27, 2020. “It is a good use of capital when the share is trading at a multiple of 8.5 times the operating profit expected in 2022 while its balance sheet is little indebted, ”says the analyst.
Irene Nattel reiterates her recommendation to buy this “pivotal” title. Its target price of $ 55 offers a strong potential gain of 44%.
Neo Performance (NEO, $ 18.00): a new rare earth industry in Europe