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Raymond (NSE:RYMD) James has reiterated its Strong Buy rating and Cdn$83.00 price target on Alimentation Couche-Tard Inc (ATD/B:CN) (OTC: ANCUF), following the company’s third fiscal quarter 2025 results, which ended on February 2, 2025. The firm’s analyst noted that Couche-Tard’s adjusted EBITDA for the quarter exceeded both their own and the consensus expectations, largely due to a higher gross profit.
Despite initial concerns about potential impacts from winter storms in the U.S. and weaker fuel margins, which led to lowered estimates prior to the results announcement, the actual incremental pressure was less than anticipated. The analyst highlighted the strong performance in U.S. merchandise margins and growth in the food service sector during the quarter as particularly encouraging signs.
The research firm’s long-term thesis on Couche-Tard remains steady. They believe that despite some short-term challenges in the organic business, caused by a dip in consumer spending, Couche-Tard is well-positioned to outperform smaller operators and achieve EBITDA growth in the coming years. The analyst pointed to the potential benefits from upcoming mergers and acquisitions, specifically referencing the expected closure of 270 GetGo Stores in calendar year 2025, and the opportunity for Couche-Tard to capitalize on the highly fragmented nature of the industry.
Additionally, Couche-Tard’s organic growth initiatives, both fuel and non-fuel related, are expected to contribute to EBITDA growth over time. While acknowledging that there may be some stock overhang due to uncertainty around Couche-Tard’s offer to Seven & I, which has resulted in a pause in share buybacks, the analyst expressed a favorable view of the risk/reward setup, with expected incremental EBITDA growth opportunity in the medium term.
In other recent news, Alimentation Couche-Tard has reported third-quarter fiscal year 2025 results that exceeded expectations, particularly with strong in-store sales performance. The company achieved an 11.2% year-over-year increase in adjusted EBITDA and a 4.2% rise in earnings per share. A significant portion of the EBITDA growth was attributed to in-store improvements and contributions from past mergers and acquisitions. RBC Capital Markets maintained its Outperform rating on Couche-Tard, setting a price target of C$94, while acknowledging the challenges faced by the convenience store sector. In contrast, Raymond James adjusted its price target for Couche-Tard to C$83 from C$90, while still maintaining a Strong Buy rating. The adjustment reflects recent trends and foreign exchange rates, with demand in the third fiscal quarter being somewhat weaker than anticipated. Analyst Bobby Griffin noted that softer fuel margins and winter storms in the United States contributed to the revised estimates. Raymond James also anticipates that Couche-Tard may pause share buybacks for the next two quarters to accumulate cash for a potential acquisition of Seven & I.
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