Thursday Analyst Updates and Downgrades

A market overview of some of the key actions of today's badysts

It will probably take another year before the strategy behind Alimentation Couche-Tard Inc.For investors, the plan (s) (ATD.BT) to double its business over the next five years is obvious, said Keith Howlett, an badyst at VMD, who expects this strategy to combine both new acquisitions and organic growth.

According to his estimates for the 2019 fiscal year, Howlett expects the Quebec-based company will have increased its adjusted US $ 2 billion EBITDA from 2014 to the end of fiscal 2019 in April.

"He is now one of the top three convenience store / gas station chains in the United States and Canada, with 7-Eleven and Marathon Petroleum," he said. "This is a global brand change program for the new Circle K logo and its presentation (colors and design), converting all convenience stores located outside of Quebec into Circle K (excluding automated service stations). in Europe, without a convenience store and employees.) In a significant percentage of the sites, the fuel also carries the Circle K brand (and in some markets under the Miles brand).

"The last phase of growth was driven by seven successful acquisitions and integrations, with results in Europe and Canada being stifled by significant devaluations of the local currency against the US dollar (Couche-Tard's presentation currency). In any case, the compound growth of EPS reached the end of 19 for the year 19 is projected at 20% over five years. "

Wednesday before the market opening, Couche-Tard announced a diluted earnings per share adjusted for the second quarter of 84 cents US, exceeding forecasts of Mr. Howlett (83 cents US) and The Street (82 cents US) ). Sales trends by store "have been good in all markets," said the badyst, with increases of 4.4% in the US, 4.6% in Europe and 5.1% in Canada .

"In the first three weeks of the third quarter of fiscal year 19, fuel margins have reached an extraordinary level," said Howlett. "The national average of weekly fuel margins is 36.9 US cents, well above our previous forecast of 18.5 US cents for the quarter (16-week quarter) .In the last three quarters, Couche-Tard Tard announced an average margin of 17.95 US cents.If the fuel margin averages 18.5 US cents in the last 11 weeks of the quarter, the average margin for the quarter will be 24 US cents. our forecast is 23.5 US cents EPS is 0.25 USD We have chosen to exclude what we consider to be "excess fuel" when setting our target price We do not expect the margins are repeated. "

The badyst raised his estimate of EPS 2019 from $ 3.37 to $ 3.36 to reflect the change in his fuel margins. His expectation for 2020 remains USD 3.40.

Keeping a "buy" rating for the title, he raised the target price for the company's stock, which went from 74 to 77 USD. The average on the street is $ 80.51, according to Thomson Reuters Eikon data.

"Couche-Tard's management has continually leveraged its stores to a level higher than the competition in a very challenging industry," said Howlett. "It was the case when it was a small entrepreneurial organization in the making, and it's still true today, and it has kept its culture at the top of the North American convenience store industry. is now seeking to elevate part of the research rigor of large consumer goods companies, while beginning to deploy new technological tools available to improve decision-making and reduce costs. are generally behind other retailers in this path and cash flow and cash flow will continue to support acquisitions. "

In addition, CIBC World Markets' Mark Petrie raised its target from $ 80 to $ 80, with a "better" rating (no change).

Mr. Petrie said, "Couche-Tard's excellent second quarter results illustrate its excellent momentum in the United States, both in fuel and in goods. The company is reaping the benefits of a favorable macroeconomic environment, a unified brand and tobacco growth, while new opportunities are available to us to improve and expand the services of restoration. "

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In anticipation of the publication of its third quarter financial results on December 6 before market opening, Raymond James badyst Kenric Tyghe modestly raised his financial expectations Dollarama Inc. (IMBALANCE).

Mr. Tyghe is expected to increase his revenues by 7.1% over the previous year, to reach $ 868 million, which is slightly below expectations set by the consensus of $ 873 million. His estimate of store sales growth of 2.9% is "driven by the expected strong growth in the number of tickets, partially offset by a negligible drop in traffic."

Its estimated EBITDA of $ 214.2 million is also slightly lower than the consensus of $ 220.8 million, while its earnings per share forecast of 42 cents is similar to Street.

"The time difference of Halloween is a significant adverse wind over the quarter, but it supports the expected strong growth of 5.8% of the F4Q19, while it is expected to reach 3.5% for the 2019 financial year." -he declares. "We expect that the combination of strict gross margin conditions, a less positive mix impact (on the Halloween change) and a potential investment in the value proposition (concentrated in the price of $ 3.50 and $ 4.00) translates into a 71% gross margin compression. base points at 39.4%. The compression of our EBITDA margins by 89 basis points, to 24.7% (for an EBITDA of $ 214.2 million), reflects the difficulties in gross margin compounded by the moderate deleveraging of selling, administrative and selling expenses. other expenses, which more than offset the cost reduction initiatives. "

Mr. Tyghe raised his EPS guidance for 2019, 2020 and 2021 to $ 1.69, $ 1.98 and $ 2.21, respectively, of $ 1.66, $ 1.90 and $ 2.21.

He maintained a "buy" rating and a goal of $ 50, which exceeds the street average at $ 47.21.

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Although there are no surprises to Vermilion Energy Inc.Investor Day (VET-T, VET-N) in Toronto Tuesday, Desjardins Securities badyst Kristopher Zack made "modest" increases in his financial forecast, thereby maintaining his "positive view of its disciplined operational strategy and its significant diversification relative to commodities ". peers. "

Highlighting his "significant" diversification of commodity prices, Mr. Zack said: "Remember that nearly 50% of 2019 cash flows will come from properties directly exposed to more favorable prices for Brent oil and gas in Europe. ", did he declare. "We also note the net advantage over competitors, with the majority of VET Canadian Light Oil selling to LSB (ie Cromer), which continues to trade at a higher price than MSW: Growth in Germany, the CEECs and the Netherlands should help maintain the European exposure over the next five years.

"The company stressed that its first priority was to protect its balance sheet, followed by maintaining the dividend yield of 8.4%, one of the most attractive on our cover list and essential, in our opinion, to stabilize the valuation. We estimate an investment-adjusted payment of 110% adjusted for investment expenses, noting that cash flow ($ 845 million) should still cover more than maintenance and capital expenditures. current dividend (total of US $ 800 million) ongoing efforts in the area of ​​environmental sustainability (which specifically includes emissions and intensity reductions) as part of its HSE practices – an element of more and more critical for oil and gas producers, in our opinion. "

Mr. Zack has increased his cash flow per share estimates for 2018 and 2019 to $ 5.04 and $ 7.16, respectively, from $ 5.99 to $ 7.03.

"The net impact is that our forecast for the CFPS for 2019 is only up 2%, a modest change that does not affect our positive bias to the stock at current levels. ", did he declare. "Our estimate may be slightly cautious as the company may make further improvements to the cost structure, particularly in Canada after the integration of the badets of the SPE. Debt is up slightly due to the acquisition of Powder River Basin in the third quarter. "

He continues to rate Vermilion as a "buy" with a $ 50 goal. The average on the street is $ 51.20.

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Following a shortfall in the third quarter and a reduction in its forecast for the fourth quarter, Brian Tunick, an badyst at RBC Dominion Securities, downgraded Chico FAS Inc. (CHS-N) to "performer sector" of "more performant", waiting for the pressure on margins to persist in 2019 due to negative competition and "pressures" omni-channel.

On Wednesday, the Florida-based women's clothing retailer's share price dropped 34.6% as a result of the release of lower-than-expected results. The company announced earnings per share of 5 US cents, down 13 US cents a year ago and 3 cents lower than expected.

"Our initial Outperform rating was based on our view that cost saving programs allowed the company to recover the volatility of the CHS portfolio, with the TSR becoming more expensive through dividends and redemptions." said Mr. Tunick. "After the failure of the 3rd quarter and the decline of the benchmark of the 4th quarter (estimate of RBC to a loss of 9 cents) against a consensus of $ 0.17), it is more difficult to ignore the uncertainties Net sales were higher for fashion and marketing brands (50% of total sales), the volatility that followed the brand's relaunch in 2018 in a vigorous consumer environment suggests some signs of something deeper, especially given the more difficult results obtained by female peers: Francesca's Holdings Corp., J.Jill Inc. and Ascena Retail Group Inc. Although a brand improvement is envisaged in the spring 2019, the turnaround time often takes time and can cause jolts.In addition to the deleveraging of competitors, omni-channel efforts are likely to continue their momentum in 2019, at lower costs. lan can finance the recovery and the dividend in the medium term, but the lack of visibility on the results and the margins of the next year pushes us aside. "

Mr. Tunick has left his target for Chico's shares going from $ 10 to $ 4.50. The average is 6.90 USD.

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See prospects for improving feedstock for 2019 and make it a key beneficiary of the consolidation of the sector, badyzed Citi badyst, P.J. Juvekar. PPG Industries Inc. (PPG-N) to "buy" from "neutral".

"The rapid drop in oil prices is on the verge of reducing some of the high commodity inflation that is putting pressure on society," he said. "We believe that PPG is accelerating the deployment of cash in mergers and acquisitions with the repurchase of shares as a fallback option, which we believe would be considered positive." In addition, with the participation of investors activists, we believe that the focus on execution at PPG has increased, which should also help the action "surpbad."

Mr. Juvekar raised his PPG share purchase target to US $ 103 from US $ 103 previously. The average on the street is 111.96 USD.

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Beacon Securities badyst Gabriel Leung started coverage of Quorum Information Technologies Inc. (QIS-X), a Calgary-based automotive retailer in Canada and the United States, rated "buy".

"In North America, we estimate that 22,165,000 addressable concession roofs represent an annual recurring software revenue opportunity of $ 700 million (based on a monthly ARPU of $ 2,500). [average revenue per sure] "If we include other modules, we think the monthly ARPU could reach $ 4,500, which would imply a recurring revenue opportunity of $ 1.2 billion a year.

"The competitive market for DMS [dealers management system] products is interesting in that it is dominated by several big players such as Reynolds & Reynolds (Private), CDK Global (CDK – N), which is a spin – out of ADP (ADP – N), and DealerTrack, which was taken private by Cox Automotive (private) for $ 4 billion in 2015. Beyond these big three, there are a number of small players that we think Quorum is one of the largest ( in terms of revenue and OEM reach), which could make it an attractive target to take on the road. "

Noting an "attractive" business model and entry point, based on his "strong" growth leverage and recurring revenue base, Mr. Leung set a target price of $ 1.25 per share.

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In other actions of badyst:

Upgraded Tim James, TD Securities Analyst AirBoss of America Corp. (BOS-T) "buy" to "keep" with a goal of $ 12.50, from $ 13.50. The average target on the street is $ 12.60.

UBS upgraded Emera Inc. (EMA-T) to "buy" from "neutral" with a goal of $ 51, rising from $ 42. The average is $ 46.57.