The report on Alimentation couch-Tard is updated and rated Buy at $67.95.
Based on its past earnings and excellent management this company looks very attractive. It’s latest announced pending big acquisition in Europe will almost certainly boost its earnings.
But it has been benefiting from unusually high gasoline margins for the past three years. If those margins were to return to the historic levels then earnings would decline significantly. For whatever reason it appears that gasoline retailers have not been competing as aggressively in recent years.
And longer term it could be quite vulnerable to the switch to electric vehicles. Suburban Commuters will charge their vehicles primarily (almost exclusively) at home. Highway “gas stations” could become even larger with many charging stations. But many suburban neighborhood gas stations will ultimately face closures. And without the gas pumps will people still visit the convenience stores? Many will for lottery tickets, tobacco and snacks. But overall the switch to electric vehicles has to be considered a headwind for Couch-Tard.
Higher interest rates are also a headwind but Couche-Tard appears to heave locked in much of its debt and so this does not appear to be a big concern.
Overall given its history and its pending large acquisition, Couche-Tard is a Buy but the longer term threat of the switch to EVs should be kept in mind.