When we made Alimentation Couche-Tard our Stock of the Year for Stock Pickers Digest (now Power Growth Investor) in 2012, it rose more than 60% that year.

Yet it wasn’t an isolated surge – since we first recommended it in 2008, the shares are up a whopping 2,863.3%!

This solid, 40-year-old niche retailer operates some 14,600 stores in Europe and North America. It not only adapted to the pandemic—it thrived. It’s done a brilliant job of making acquisitions pay off in Canada, the U.S., and Europe too.

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Its latest purchase adds another high-demand element to its business, one that lets the company cross-sell its services. This firm is well positioned to keep prospering in its markets. That means its share price has lots of room to move higher.

It’s also relatively cheap at 18.8 times forecast earnings.

ALIMENTATION COUCHE-TARD INC. (Symbol ATD on Toronto; www.couche-tard.com) operates 14,595 convenience stores across North America and Europe.

In early January 2024, Couche-Tard completed the acquisition of retail assets in Europe from French energy giant TotalEnergies SE for 3.1 billion euros ($4.5 million Cdn.).

The assets include TotalEnergies’ retail networks in Germany and the Netherlands, comprising more than 1,500 service stations.

TotalEnergies and Couche-Tard have also formed a joint venture to own and operate over 600 service stations in Belgium and Luxembourg. The joint venture is 60% owned by Couche-Tard and 40% owned by TotalEnergies.

TotalEnergies believes that the partnership will maximize the stations’ non-fuel sales. The service stations in the four countries will remain under the TotalEnergies banner as long as the fuel is supplied by the company, for at least five years.

For Couche-Tard, the deal lets it grow further in Europe by expanding in some of that continent’s strongest economies.

Growth Stocks: Additional revenue streams keep expanding Alimentation Couche-Tard’s potential

Driven by acquisitions, including the June 2017 purchase of CST Brands for $4.4 billion, Couche-Tard’s revenue jumped 73.3% from $34.14 billion in fiscal 2016 (fiscal years end April 30) to $59.18 billion for fiscal 2019 (all figures except share price in U.S. dollars). For fiscal 2020, revenue then fell 8.5% to $54.13 billion. The decline was mainly due to lower fuel demand as the COVID-19 pandemic took hold. In fiscal 2021, revenue dropped a further 15.5%, to $45.76 billion as the pandemic continued to hurt fuel demand. Revenue then rebounded 37.3% in the fiscal year ended April 25, 2022, to $62.81 billion. In the fiscal year ended April 25, 2023, revenue rose a further 14.4%, to $71.86 billion.

As a result of the earlier revenue increases between 2016 and 2019, earnings climbed 60.2% from $1.19 billion, or $1.04 a share, to $1.90 billion, or $1.63. (All per-share figures adjusted for a 2-for-1 split in September 2019.) Earnings then rose 15.8% in fiscal 2020, to $2.20 billion, or $1.97 a share. That rise came despite the lower revenue; it reflects sharply higher profit margins on fuel due to falling crude oil prices. In fiscal 2021, earnings rose 22.6%, to $2.72 billion, or $2.45 a share. Earnings then increased just 2.2% in fiscal 2022 to $2.77 billion, or $2.60 a share. The company’s costs rose and its fuel profit margins were hurt by rising crude prices. In fiscal 2023, earnings climbed a further 13.8%, to $3.15 billion, or $3.12 a share.

In the third quarter of fiscal 2024—the three months ended February 4, 2024—Couche-Tard’s revenue fell by 2.2%, to $19.62 billion from $20.06 billion a year earlier (all figures except share price in U.S. dollars). The decline came mostly from lower overall fuel sales.

Excluding one-time items, earnings fell 15.7%, to $625.0 million from $741.0 million. Improved sales of higher-profit-margin convenience store offerings were offset by the lower fuel revenue. Per-share earnings fell 12.2%, to $0.65 from $$0.74, on fewer shares outstanding.

Couche-Tard continues to aggressively repurchase its shares. During the quarter ended February 4, 2024, it spent $175.9 million to buy back shares. In the last nine months, it spent $1.1 billion.

Meanwhile, investors are also benefiting from a 25.0% rise in their quarterly dividend, to $0.175 (Canadian) a share from $0.14. That increase started in December 2023. The shares now yield 0.9%.

The company continues to roll out its loyalty program. That encourages customers to visit more often and spend more per visit.

The program, Inner Circle, gives members discounts on fuel ($0.03 per gallon) and merchandise. It upgrades to a premium membership, which includes more exclusive deals as well as early notice of new products once the customer spends $500 at Circle K stores (and a gasoline discount of $0.05 per gallon).

Couche-Tard’s launched its loyalty program in June 2023—and now has close 5 million fully enrolled U.S. members.

Meanwhile, to boost its prospects, Couche-Tard keeps opening electric vehicle (EV) fast chargers. Its network now consists of more than 2,400 charging points, including those in Europe and including 50 charge points for heavy trucks in Sweden. The company reports that it’s seeing a significant increase in overall charging actions on its Circle K-branded chargers driven by network expansion, improved payment offers and station upgrades, making them easier for its EV customers. In North America, it remains committed to deploying 200 chargers at 200 sites, and its footprint in Canada now covers Quebec, Ontario, B.C. and Alberta and 11states in the U.S.

The firm also added to its chain of car washes with the acquisition of True Blue Car Wash LLC, which has 65 locations in high-traffic areas of Arizona, Illinois, Indiana and Texas. Couche-Tard completed the purchase in February 2023, and the purchase price was about $300 million.

True Blue’s car washes were a good fit with Couche-Tard’s own network of more than 2,500 car-wash locations, and True Blue had a strong pipeline of future new sites planned and under development. The chain saw strong growth in recent years and washed more than 10 million cars in 2022.

Couche-Tard says that more than 85% of True Blue’s car wash locations were within three miles of one of its own Circle K locations. That means the acquisition provided a strong geographic overlap to support traffic between True Blue sites and Circle K convenience stores.

Growth by acquisition adds risk, especially with a string of deals as big as these. However, the company has a long track record of successfully integrating those businesses.

The company has announced a new five-year growth plan. It now aims to increase its annual earnings before interest, taxes, depreciation, and amortization (EBITDA) from $5.8 billion U.S. in fiscal 2023 (fiscal years end April 30) to $10 billion U.S. in fiscal 2028.

A big part of that growth will come from acquisitions, including its recently completed deal to buy most of the European retail assets of French energy giant Total Energies SE (see above).

Cost cutting will also help Couche-Tard reach its 2028 EBITDA target as its copes with rising employee wages and other costs.

For all of fiscal 2024, Couche-Tard will probably earn $2.98 U.S. a share, and the stock trades at a moderate 18.8 times that forecast. The $0.56 (Canadian) dividend yields 0.9%.

Recommendation in Power Growth Investor: Alimentation Couche-Tard is a buy.

We hope you benefited from this analysis of Alimentation Couche-Tard. The company is just one of the top-performing stock picks of our Power Growth Investor newsletter.

Of course, not all our picks over the years have produced these kind of spectacular gains. Some, in fact, have led to losses. But all portfolios need superstar stocks like this to offset those inevitable losses.

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This post was originally published in April 2023 and is regularly updated.