Opinions
Javed Mirza
Alimentation Couche-Tard (B)
ATD.B-T
PAST TOP PICK
Jul 12, 2024
Stock price when the opinion was issued
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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.
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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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.