Opinions James Hodgins
Alimentation Couche-Tard (B)ATD.B.TOBUY ON WEAKNESSMay 15, 2018
Stock price when the opinion was issued
As of Dec 07, 2021. Market Open.
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EPS of 68c matched estimates; sales of $20.90B missed estimates of $21.21B. EBITDA of $1.64B beat estimates by 3%. Supply-chain optimization could let Couche-Tard maintain fuel profitability across its key markets for the rest of the fiscal year. US fuel margins declined sequentially (down 3.9%), but increased 2.5% compared with last year, an inflection point for the metric. If the company can keep this cadence of growth for 4Q, it's likely that US fuel margins may remain around mid-40 cents per gallon for the year. Canada might remain in the low-teen cents and high-single digits in Europe. Better control management allowed US inside-the-store margins to expand. As for M&A, recent acquisitions seem to remain on track, with the company reiterating its ambition for a friendly merger with Seven Eleven now that the possibility of a management buyout is gone. The stock is up, but this is likely more due to ongoing discussions with Seven Eleven rather than the quarter. But we are comfortable with the results.
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Very strong business - founder led & owned. Exception creator of wealth the past ~20 years. Has owned shares since 2014. Very good consolidator of convenience stores. High quality capital allocation skills. Recent 7-Eleven M&A is interesting, but depends on the final price that is settled on. Would recommend holding and/or buying.
Will continue to own. Great business with excellent capital allocation skills. Boring business that has a great chart. Very strong management team that gives investors ability to sleep at night. Expecting strength in this cycle.
Javed Mirza(A Top Pick Feb 01/22, Up 12%)
Well-run and positioned to offer e-charging stations given all their stations and locations. Well-financed. Still has a little more upside.
Michael Sprung
Chris Blumas
Brian MaddenBrian Madden
Michael Sprung
Rick Stuchberry
Michael Sprung
John O'Connell, CFA
There’s only so many gas stations to buy. Over the past years, they have added tremendous value with prepared food in gas stations, and other services. At some point, there is a limit. The EV/EBIDTA ratio is now near the company’s 5-year low. However, the current weakness in Couche-Tard’s price might be transitory and he is interested in buying at this level. Gas retailers have a hard time when gas prices are rising quickly because it is hard to raise retail prices in line with wholesale. However, these companies make it up as prices go down, lowering rates less quickly than wholesale. He continues to be bullish on energy, which suggests further increases in gas prices and further pressure on Couche-Tard. He is looking for an entry point to buy the stock.