ALIMENTATION COUCHE-TARD $30.55 (Toronto symbol ATD.B: TSINetwork Rating: Extra Risk) (1-800-361-2612; www.couchetard.com; Shares outstanding: 179.4 million; Market cap: $5.5 billion; Yield: 1.0%) is the largest convenience-store operator in Canada, with 2,000 outlets. It also has over 3,700 U.S. stores. The Canadian stores operate under the Couche-Tard and Mac’s banners, while the U.S. stores mainly use the Circle K brand. The company sells fuel at 72% of its stores.
Couche-Tard’s revenue continues to rise rapidly. Revenue jumped 86.7% between 2006 and 2010, to $19.0 billion from $10.2 billion (all figures except share price and market cap in U.S. dollars). Much of the rise comes from a steady stream of acquisitions. But the company was also able to boost profits with those acquisitions. Earnings per share jumped 106.2% over the same five years, to $2.00 from $0.97. Revenue will likely reach almost $24 billion this year.
Couche-Tard’s earnings per share rose 6.9% in the three months ended October 9, 2011, to $0.62 from $0.58. Sales rose 24.1% to $5.2 billion from $4.1 billion. The gains came from a rise in fuel prices, the stronger Canadian dollar and higher merchandise sales.
The company continues to introduce new products with higher profit margins, including new drinks and improved fresh and take-out food. This lets it take full advantage of traffic in its stores, and it’s also a low-risk way to grow. Couche-Tard also offers an array of other products and services, such as automatic teller machines, lottery ticket sales, cell phones and prepaid phone and credit cards.
The company raised its quarterly dividend by 20%, to $0.075 a share from $0.0625, with the December 2011 payment. The shares now yield 1.0%. Couche-Tard trades at a reasonable 13.3 times the $2.30 a share that it should earn in 2012.
Alimentation Couche-Tard is still a buy.
