On today’s TSX Breakouts report, there are 58 stocks on the positive breakouts list (stocks with positive price momentum), and nine securities are on the negative breakouts list (stocks with negative price momentum).
Discussed today is a stock that appears on the positive breakouts list. The stock has a unanimous buy recommendation from 13 analysts. For the past three consecutive quarters, the company has delivered better-than-expected earnings results that has sent the share price soaring the following trading day with a gain ranging between 4 per cent and 7 per cent. On March 19, the company is set to announce its quarterly earnings results. The company may report yet another earnings beat driven by strong fuel margins, which may send the share price surging on the news. The security highlighted today is Alimentation Couche-Tard Inc. (ATD.B-T).
A brief outline is provided below that may serve as a springboard for further fundamental research.
The company
Quebec-based, Alimentation Couche-Tard is a leading convenience store operator with operations across the globe.
As at Oct. 14, the company had 9,943 convenience stores in North America and 2,718 stores in Europe. The company’s core banners are “Circle K” and “Couche-Tard.” The company also has more than 2,000 stores operated internationally under licensing agreements in 14 countries and territories including China, Hong Kong, and Mexico. The company’s growth has historically been fueled by acquisitions.
After the market closed on Nov. 27, the company reported strong second-quarter fiscal 2019 financial results (the company’s fiscal year end is April 30). Adjusted earnings per share came in at 84 US cents, above the consensus estimate of 82 US cents per share. Same-store merchandise sales expanded 4.4 per cent in the U.S., rose 4.6 per cent in Europe, and increased 5.1 per cent in Canada. The following trading day, the share price jumped 5 per cent on high volume with over 4-million shares traded.
The company will be reporting its third-quarter fiscal 2019 financial results on Tues. March 19. The consensus earnings per share estimate is US$1.06.
For the past three consecutive quarters the share price has rallied the following day by between 4 per cent and 7 per cent – a healthy one-day gain. Strong fuel margins during the third quarter may result in yet another earnings beat and the share price may pop once again after it reports its quarterly financial results.
Dividend policy
The company pays shareholders a quarterly dividend of 10 cents per share, or 40 cents per share on a yearly basis. This equates to an annualized dividend yield of 0.5 per cent.
The company announced an 11-per-cent dividend increase in July 2018, raising the quarterly dividend to its current level of 10 cents per share from 9 cents per share.
Analysts’ recommendations
There are 13 analysts that actively cover this consumer staples stock, of which all 13 analysts have buy recommendations.
The 13 firms that provide recent research coverage on the company are as follows in alphabetical order: Accountability Research, Barclays, BMO Nesbitt Burns, Canaccord Genuity, CIBC Capital Markets, Desjardins Securities, GMP FirstEnergy, Macquarie, National Bank Financial, Raymond James, RBC Dominion Securities, Scotiabank, and TD Securities.
Revised recommendations
Earlier this month, Patricia Baker, the analyst at Scotiabank, increased her target price to $84 from $82.
In Feb., Irene Nattel, the analyst at RBC Capital Markets, lifted her target price by $6 to $86.
Financial Forecasts
The consensus earnings per share estimates are US$3.46 in fiscal 2019 and US$3.50 in fiscal 2020.
Earnings estimates have increased in recent months. For instance, three months ago, the Street was forecasting earnings per share of US$3.29 for fiscal 2019 and US$3.47 for fiscal 2020.
Valuation
According to Bloomberg, the stock is trading at price-to-earnings (P/E) multiple of 16.2 times the fiscal 2020 consensus estimate. This valuation is in-line with the stock’s historical five-year average multiple of 16.8 times.
The average 12-month target price is $81.78, suggesting the stock has 7-per-cent upside potential over the next year. Individual target prices are as follows in numerical order: $75 (low on the Street is from Jim Durran, the analyst at Barclays), $77, two at $78, two at $79, two at $80, $81, $84, $85, and two at $86. The two analysts on the Street with the highest target prices are TD Securities’ Mike Van Aelst, and RBC Dominion Securities’ Irene Nattel.
Insider transaction activity
Year-to-date, there has not been any trading activity in the public markets reported by insiders.
Most recently, on Dec. 27, director Eric Boyko invested over $132,000 in shares of the company. He purchased 2,000 shares at a price per share of $66.06 for an account in which he has indirect ownership (Boyko Investments Corporation), increasing the account’s holdings to 8,400 shares.
Prior to that, on Dec. 13, Suzanne Poirier, a senior officer at the company, bought 1,500 shares at a price per share of $68.21, initiating a portfolio position. The cost of this purchase totaled over $102,000.
Chart watch
On Wednesday, the share price closed at a record high. Year-to-date, this is a top performing stock in the S&P/TSX consumer staples sector with a price return of over 12 per cent.
Since mid-2015, the stock price has been trading sideways, predominately between $52 and just below $70. At the beginning of the year, the share price finally broke above this trading range.
Looking at key resistance and support levels, the stock’s next ceiling of resistance is around $80. Looking at the downside, there is strong technical support around $70, near its 50-day moving average (at $71.61). Failing that, there is support around $65, close to its 200-day moving average (at $64.24).
The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company’s dividend policy, analysts’ recommendations, financial forecasts, and provides a brief technical analysis for a security to provide readers with more information.
If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.
Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indexes that have a minimum market capitalization of $200-million.
A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.