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On Friday, Empire Company Limited (EMP/A:CN) (OTC: EMLAF) received an upgraded stock rating from Scotiabank (TSX:BNS), moving from Sector Perform to Sector Outperform. The financial institution also increased the price target for the company’s shares to Cdn$49.00, up from the previous Cdn$47.00.
Scotiabank analysts cited several factors for the positive outlook on Empire Company. The improved internal execution within the company, along with encouraging same-store sales (SSS) trends, were noted as key drivers of the upgrade. Additionally, the stock’s significant negative reaction in the market was seen as an opportunity.
Empire Company’s gross margin percentage has been on an upward trend, and the company’s cost reduction efforts are ongoing. The analysts also pointed out that Empire’s food SSS is in line with its peers, benefiting from the growth of third-party e-commerce and the ’Buy Canada’ consumer trend. These factors are expected to provide some offset to the company’s lack of pharmacy and discount food presence.
The valuation of Empire Company at approximately 13.5 times price-to-earnings (P/E) ratio was considered attractive by the analysts. In light of this, Scotiabank has revised its fiscal year 2026 and 2027 earnings per share (EPS) estimates upwards by roughly 2%. The firm now projects a double-digit EPS compound annual growth rate (CAGR) over two years, along with a nearly 5.5% EBIT CAGR for the same period.
In their commentary, Scotiabank analysts acknowledged that while the market may be shifting away from staples, they view Empire Company as a relatively defensive investment with potential upside. The upgrade reflects confidence in the company’s business performance and future prospects.
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