Analysts who follow Alimentation Couche-Tard Inc. are living through a careful-what-you-wish-for scenario this week.
For years they've been waiting for the convenience store giant to come through with another blockbuster deal like the company's 2003 purchase of U.S. convenience store operator Circle K Corp. In April, Couche-Tard delivered, announcing a $2.8-billion takeover of convenience store operator Statoil Fuel and Retail ASA and its network of 2,300 stores in northern Europe. Investors celebrated, driving the stock to new highs. Now, after the deal closed in June, Couche-Tard will on Wednesday report its first quarter that includes some of Statoil's financials in its numbers – albeit just five weeks' worth.
Analysts say this is going to be a messy quarter, meaning there are so many unknowns that coming up with profit estimates has been challenging. The quarters of Couche-Tard and SFR don't align, and the impact of Europe's financial crisis, though not as painful in the countries where SFR operates, is still an uncertainty. Couche-Tard will likely have an acquisition-related writedown. Meanwhile, gasoline margins in the U.S., where Couche-Tard is a major gas retailer, vary from quarter to quarter, though they tend to settle in at about 15 cents (U.S.) a gallon on a yearly basis.
That makes for some pretty wild guessing on how first quarter results will turn out. Analysts, as of late last week, were calling for earnings of anywhere from 78 cents per share to 98 cents.
So don't worry too much about the quarter's numbers, and instead pay close attention to what management says about the future. RBC Dominion Securities Inc. analyst Irene Nattel said investors should focus on the steps to integrate Statoil into operations, conditions in Statoil's European economies and gas margins in Europe.
Analysts are also looking for news about tax rates, North American gas margins and the company's continued, and so far successful, efforts to counter a weak economy on this side of the Atlantic by driving up revenues.
Of course, analysts are always keen to hear about the next acquisition. Couche-Tard will likely continue to deliver smaller deals of less than 100 stores each – it recently signed a deal to buy 29 stores in the Orlando area – but the financially prudent company intends to stick to its game plan after other major deals: quickly pay down its debt to keep its investment grade rating, and not stretch itself again until its balance sheet is ready. With all the changes swirling around Couche-Tard, it's nice to see that some things have stayed the same.