Alimentation Couche-Tard Inc (TSX:ATD.B) drew praise from analysts at Canaccord today which raised its price target for the company to $68 from $65 after quarter two results beat its expectations.
The Canadian convenience store operator reported adjusted EBITDA of $1.46 billion ahead of consensus of $1.44 billion, while adjusted EPS of $0.82 was ahead of Canaccord’s $0.77 estimate but below consensus of $0.84.
Fuel volumes continued to be challenged versus pre-pandemic levels, with same-site volumes declining 1.9%, 6.3%, and 6.5% in the US, Europe, and Canada, respectively.
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However, fuel gross margins exceeded expectations in the US and Canada but came in below forecast in Europe.
Merchandise same-store sales were strong, up 5.6% in the US and 2.9% in Europe, driven by continued growth in the company's Fresh Food Fast program although they fell 1.5% in Canada due to increased competition within the tobacco market.
SG&A costs rose 8.1% year-on-year, higher than forecast, although management noted that the headwinds the company is experiencing on the wages/labour front are lower in magnitude relative to a quarter ago.
“On the topic of M&A, management noted it remains cautiously optimistic that it will have the opportunity to undertake accretive M&A in the near to medium term” Canaccord said.
The broker highlighted a 27.3% hike to the dividend to $0.56 and expects further share buy-backs going forward.
Canaccord kept it buy rating alongside the revised price target which represents 18.0x its 2024 EPS estimate of $2.82.
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