Economy

2023-06-22 16:08:53

The NFI Group should benefit from the withdrawal of Nova Bus from the American public transit bus market. (Photo: 123RF)

What to do with the titles of Couche-Tard, TFI International and NFI? Here are some recommendations from analysts likely to move prices soon. Note: the author may have a totally different opinion from that expressed by the analysts.

Alimentation Couche-Tard (ATD, $65.30): fuel will drag profits down

Weaker demand for fuel in the United States will drag earnings per share down, as much for the fourth quarter of 2023 as for the financial year 2024, estimates the firm Stifel GMP.

Analyst Martin Landry said he expects earnings per share of $0.43 for the fourth quarter, below market consensus ($0.49) and down 21% compared to the same quarter in 2022.

This forecast is greatly propelled by a margin on gasoline in the United States which he believes will be lower than expected, although he probably admits to being on the more conservative side of this forecast.

He adds that fuel sales volumes have declined by an average of 2.5% in the United States over the past four quarters due to high retail prices, reduced mobility trends and the process of creating a new picture.

While promotional efforts by Couche-Tard might boost volumes, the analyst doesn’t see much upside potential beyond its 1% annual growth estimate. For comparison, volumes remained neutral at 7-Eleven during the period covering the Quebec company’s 2023 fiscal year.

If volumes were to remain stable, fuel margins will remain historically strong. However, they will suffer from the comparison with 2022: they should drop from $0.46 per gallon to $0.37 per gallon (-20%) this year.

On the merchandise side, Martin Landry expects same-store sales growth of 3.5% in the United States, mainly driven by inflation. If cigarettes face headwinds, the Fresh Food program increases and grows sales.

Stifel GMP maintains its buy recommendation for Couche-Tard stock as well as its target price of $74.

TFI International (TFII, $138.53): Recovery stuck in traffic

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