Alimentation Couche-Tard (TSX:ATD.B) reported earnings after the bell today, and yet again the convenience store operator didn’t disappoint.
The company reported net earnings of $538.8 million, which was an 18.2% increase compared to the first quarter of 2018, where net earnings came in at $455.6 million. The company acquired eight more stores and completed the construction of 12 for a total of 20 openings in the quarter.
The second largest convenience store operator now owns a whopping 9,793 stores across the globe and has another 32 in the construction phase, expected to be open in fiscal 2020.
Couche-Tard has strategically reduced operating expenses by 5.5% year over year and increased operating income by 25%. Earnings per share saw a 11.5% increase year over year, and fuel profits are up just over 7%.
EBITDA saw an increase of 5.6%, coming in at $1.04 billion, and the company now has over $1 billion in cash and cash equivalents.
There really isn’t much to say about the quarter other than it was an amazing start to the year for the company, beating expectations with earnings of $0.97 per share when only $0.95 was expected. Revenue of $14.16 billion came in a little shy of the consensus estimate of $14.9 billion.
Investment with Fire and Flower
Couche-Tard made a strong move in the Canadian cannabis industry in early August, acquiring 9.9% ownership in Fire & Flower Holdings. The company has also issued Common Share purchase warrants that if exercised will give it majority interest in the company. The company is looking to work together with Fire and Flower to help it scale its retail stores and gain more exposure to the Canadian cannabis markets.
Elimination of debt, purchase of shares
Couche-Tard managed to pay off over $300 million in US-dollar-denominated notes that were set to mature in December of 2019. Along with that, Couche-Tard repurchased over 1.5 million of its shares back for cancellation, totaling over $91 million. We should expect for this trend to continue as profitability increases.
Outlook and share split
Alimentation has posted strong numbers for quite some time now, and it seems like they will continue to do so in the future. Shares are up 15.5% in 2019 and nearly 25% from one year ago today. All things considered, the stock is trading at a premium right now, with a price to earnings ratio of over 24 and a 5 year PEG of 2.17.
However, the company recently announced based of its continued profitability in Q1 that they will be executing a 2-for-1 stock split in late September. Stock splits are generally considered good news, and as such I expect Couche-Tard’s price to continue trending upwards.
In the consumer defensive sector, I’d consider the company one of the best, if not the best stocks within it. For this reason, I included Alimentation Couche-Tard on my most recent article detailing some of the best blue chip stocks in Canada.