Shares of Alimentation Couche-Tard (TSX:ATD) have been steadily climbing higher in recent months. The stock recently hit a brand-new all-time high of $72 and change this September, even amid a market-wide pick-up in turbulence. Undoubtedly, recession risks, consumer-spending headwinds, and other jitters affecting the broader stock market do not seem to be bothering the $70 billion Canadian convenience store firm.
Indeed, retail is an ugly place to be right now. However, Couche-Tard isn’t just like other retailers. It’s been so incredibly resilient, even amid fluctuations in fuel prices. The company’s merchandising mix has been a source of strength amid high inflation and economic worries.
Couche-Tard flirts with new all-time highs following solid first quarter
Recently, Couche-Tard reported decent results for its latest quarter for the first quarter of its fiscal year 2024. Earnings per share (EPS) came in at US$0.86, just ahead of the analyst estimate of US$0.78. Revenue also came in at US$15.6 billion, which was down around 16% year over year. Indeed, there were some headwinds weighing on the fuel business. Though the latest earnings beat wasn’t as impressive as the prior one, I still think investors are getting a great deal on shares post-earnings and less than 1% off all-time highs.
Like it or not, Couche-Tard has a plan to keep growing, regardless of whether the economy is due for a hard landing over the next year. The company’s earnings growth profile is incredibly impressive. And thus far, it’s proven quite defensive! Moving ahead, Couche-Tard could continue to deliver exceptional results, as the firm continues making smart acquisitions across the convenience store space.
Couche-Tard stock could be in for even more gains from here
The acquisition of TotalEnergies’s 2,000 stores is expected to close by year’s end. As the company integrates new stores into the lineup, I find it’ll be tough to keep earnings growth suppressed, even if the rest of the market ends up topping out. The TotalEnergies deal, I believe, could help power even more gains, perhaps sending the stock well above the $85 per-share mark.
In any case, I continue to pound the table on management’s unique ability to create value for investors organically and via mergers and acquisitions. With plenty of dry powder on the sidelines, I wouldn’t be surprised if the firm makes another huge deal over the next year. If anything, a hard landing for the economy may be better for Couche-Tard over the long run, given it’ll be in a spot to pick up one of its industry peers at a potentially more sizeable discount.
Shares of ATD remain quite cheap, even at these highs!
As a value investor, I hate chasing performance. However, even after surging around 20% year to date, ATD stock still looks cheap. Shares go for 17.3 times trailing price to earnings, which, I believe, still discounts the earnings growth and the talents of management.
Could ATD stock be in for continued upward re-ratings over the coming 12 months? I think that could be the case. Just last week, a large number of analysts increased their price targets. Ultimately, Couche-Tard continues to impress, and the stock doesn’t seem to be getting as much respect as the market’s tech-savvier growth plays.
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