Shares of Canadian convenience store giant Alimentation Couche-Tard Inc. experienced a significant surge following the company's impressive quarterly earnings report and confirmation of ongoing acquisition activities.
Strong Financial Performance Drives Investor Confidence
The Laval, Quebec-based retailer saw its stock climb almost five percent to $74.40 during morning trading in Toronto, marking the company's largest intraday gain since early September. This positive market movement came as Couche-Tard reported adjusted earnings of 78 cents per share for the quarter ended October 12, representing an approximate five percent increase compared to the same period last year.
This earnings performance notably exceeded analyst expectations, beating the average estimate of 75 cents per share from analysts surveyed by Bloomberg. Remarkably, this marks only the second time in two years that the company has achieved year-over-year growth in per-share earnings.
Strategic Expansion Through Acquisitions
CEO Alex Miller revealed that the company is actively pursuing acquisition opportunities across its key markets. "We are active with files in all three of our large geographies in Canada, in Europe and in the United States," Miller stated during Tuesday's earnings discussion.
When questioned about potential transactions, Miller emphasized that "We're engaged, and we continue to see quite a bit of deal flow." This announcement comes just months after the company ended its pursuit of Japanese competitor Seven & i Holdings Co. in July, citing an inability to engage the larger rival in serious negotiations.
Merchandise Sales Growth Offsets Fuel Volume Declines
The company demonstrated robust performance in merchandise sales across all regions, with same-store sales for food and beverages increasing by 1.2 percent in the United States, Couche-Tard's largest market. Miller attributed this success to the company's value-focused strategy, noting that "We think we've really found something here that is really resonating with consumers and consumers that are strapped for cash."
While merchandise sales showed strength, the company experienced mixed results in fuel volumes. Same-store fuel sales decreased in both the U.S. and European markets, while showing a slight increase in Canada.
Despite the positive earnings performance, Couche-Tard reported revenue of US$17.9 billion for the quarter, falling slightly below analyst forecasts. However, RBC Capital Markets analyst Irene Nattel viewed the results positively, stating that "A second consecutive quarter of positive and sequentially improving key performance indicators and financial results is another step in the right direction" for the company to achieve a higher valuation multiple.
