Alimentation Couche Tard shares up after analyst upgrades following investor day


Investor interest in Alimentation Couche-Tard Inc. is on the rise as its share price rose to a record high Thursday, following upgrades by several analysts after the convenience store retailer's investor day presentation.

The Quebec-based company's class-B shares were up $2.45 or 5.3% at $48.86 in afternoon trading after hitting $49.22 earlier in the day.

Last Wednesday June 14, the company discussed a growth strategy that was well-received by analysts.

It outlined how it would achieve its 2018 strategy of doubling its earnings before in interest, taxes, depreciation and amortization to US$6.3 billion by the end of fiscal 2023, with half coming from acquisitions and half from organic growth.

"I'm truly proud to report this year, a year clouded by COVID-19, we had record-breaking financial results, we stayed focused on our strategic goals and executed and innovated better than ever,'' Couche-Tard CEO Brian Hannasch told analysts.

A series of company executives detailed the company's plans for the future from offering fresh food at 6,000 North American stores, to exporting its experience with electric vehicle charging in Norway to adopting more "frictionless'' shopping in-store and licence plate recognition for fuel payment.

After enduring a challenging year because of COVID-19 that curtailed fuel consumption, Hannasch has high hopes for the future.

"As vaccination rates increase across the globe, I'm optimistic that brighter days are ahead, and we'll see more traffic on the road and in our stores and fuel volumes starting to return to normal.''

Analysts were enthusiastic in the aftermath of the presentation.

The meeting "gives us greater confidence in ATD's ability to meet and exceed stated EBITDA growth target,'' Irene Nattel of RBC Dominion Securities wrote in a report, where she raised her target price for company shares 14%, to $65 from $57.

She said one the biggest pushbacks from investors is the perceived difficulty in concluding "needle-moving'' mergers and acquisitions.

"Today's event should help allay some of these concerns with organic growth now overtaking M&A as the main engine, with a ratio of 60/40, up from prior guidance 50/50 and traditional 30/70,'' she said.

"To be clear, we believe ATD has significant opportunity to remain a very active consolidator in the global c-store industry, with balance sheet capacity in excess of $15B. But today's event clearly underscored the emerging visibility of organic contribution now that traction is well entrenched.''

Chris Li of Desjardins Securities said the company presented an "attractive organic growth outlook'' despite limited discussion on acquisitions and electric vehicle economies in which EV charging doesn't fully offset dollars lost from fuel.

"While these are fair concerns, we believe ATD is well-positioned to navigate through these challenges, supported by its size and scale, highly experienced management team, market leadership in EV charging, new growth opportunities and strong financial position,'' he wrote in a report.

Couche-Tard's experience in Norway, which has high electric vehicle use, supports its evolution to become a "customer-centric retailer from one focused on vehicles with higher spinoff sales in-store for electric vehicle customers than from the sale of fossil fuels.''

Despite maintaining its interest in acquisitions, management also confirmed it is no longer interested in the grocery sector after the French government objected to its takeover bid for Carrefour.

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