Grocer and pharmacist Loblaw will report its results for the first quarter of 2023 on May 3. (Photo: 123RF)
What to do with Loblaw, Richelieu and BCE securities? Here are some recommendations from analysts likely to move prices soon. Note: the author may have a totally different opinion from that expressed by the analysts.
Loblaw (L, $126.00): good quarterly results are expected
Grocer and pharmacist Loblaw will report its results for the first quarter of 2023 on May 3 and analyst Vishal Shreedhar of National Bank Financial expects them to be good.
He expects earnings per share to grow 14.5% year on year to $1.56, while analysts’ consensus is a little more pessimistic at $1.54. In the corresponding period of the previous fiscal year, it had reached $1.36.
The analyst expects that sales of comparable stores (open for more than a year) of grocery stores rose 5.5% over one year (+2.1% last year). As for pharmacies, they should climb 5% for regular products (+3.6% last year) and 6% for prescription drugs (+6.8% last year).
Overall, Vishal Shreedhar anticipates sales of 13.01 billion dollars (B$), while those for the corresponding period in 2022 had reached 12.26B$. The analyst consensus is a little more optimistic at $13.13B.
He adds that earnings before interest, taxes and amortization (EBITDA) will reach $1.46 billion (consensus at $1.4 billion), which had reached $1.34 billion last year.
“Statistics Canada data shows food inflation hit 10.6% in February, down from over 11% between September and January. “With such levels of inflation, it is difficult for Loblaw to pass on all price increases to consumers. We believe that its diversified business model will allow it to continue to generate growth, as well as its initiatives to improve its efficiency,” writes the analyst.
He believes that inflation should be more subdued in the second half of the year and that consumer wallets will remain under pressure, which means that the popularity of discount or private label products is here to stay.
Vishal Shreedhar reiterates his recommendation of “outperformance” on the title of Loblaw and raises its target price over one year, which goes from $137 to $140. This increase gives the stock a valuation of eight times the enterprise value/EBITDA ratio for the 2024/2025 financial years.
