Jean Coutu Group (PJC) (A) (PJC.A.TO) Buy,…

Jean Coutu Group (PJC) (A) (PJC.A.TO)

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BUY

Has some work to do in turning around its US Ekard stores and getting them on the same level of profitability as its own stores. Reasonable upside potential, but it's a question as to when it really gets going. Not a bad holding. Probably a counter cyclical holding in a weak market, recessionary period.

DON'T BUY

His model price is $18.28. Trading bang on its model price. Earnings estimates have been everywhere, probably because of US$ earnings.

DON'T BUY

Estimated earnings a year out are $0.99 which is comparable to Shoppers Drug Mart (SC-T). The price/earnings ratio is about the same. Doesn't deserve the same price/earnings ratio as Shoppers at this point. Might consider at $16.

PAST TOP PICK

(A Top Pick Mar 9/05. Down 2%.) They're getting the company right. Should see good earnings coming through.

WAIT

It's all a matter of execution with Ekerds in the US. A tremendously large acquisition. Earnings in the last quarter were disappointing. If they can sort Ekerds out and bring it up to the level of their New England store, they'll do very well. Otherwise, it could drag down the entire chain.

BUY

Buying the US assets was a tremendous coup. The potential of earnings for the next 5 years is amazing.y

WATCH

There was a lot of scepticism about a Canadian company buying American assets, but they are very good at managing assets. Basically they have taken underperforming stores and they have a big job to integrate the organizations. They are part way along in the process. If they can show that they can improve sales/margins, interest in the stock will pick up.

DON'T BUY

Longer term it will probably be a fine company, but hasn't much upside potential at the present time. Not attracted to it unless he can buy at a fair discount.

DON'T BUY

Took a look at their balance sheet with the Eckard assets built into them and have a model price of $19.

TOP PICK

Has faith in management, likes the demographics/drugs. Some people don't like it, he does.

PAST TOP PICK

(A Top Pick Nov 29/04. Up 6.5%.) This is a tomorrow stock in that in 1/3 years down the road it will be a terrific investment.

TOP PICK

A lot depends on their US Eckert acquisition. Convinced that they are going to be successful as they are very competent. At a good entry point.

WATCH

There is some risk in their acquisition in pulling in the synergies and the cost structures in the US operations. Will have to see a couple of quarters to see how they do with it. There is potential.

WEAK BUY

Results today appear superficially pretty good, but the press release didn't give enough details to really know what's going on with the Eckard acquisition. Not sure that they can take the tired, old chain, fix up the front of the store and get some high margin product when faced with some pretty strong competition.

BUY

Likes their US acquisition. Very capable of handling it. Noted for their tight distribution practices.

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Jean Coutu Group (PJC) (A) (PJC.A.TO)