Inside the Market’s roundup of some of today’s key analyst actions
), Citi analyst Jon Tower is concerned unit growth challenges “may persist” for the parent company of Tim Hortons and Burger King.
“Key topics/questions - Have ongoing value pushes across the US LSR industry shifted broader perceptions about the ability to find value in the category? Trends in U.S. wages – recent BLS data suggests flat-lining if not declining LSR wages, and, if that is the case how quickly does that show up in additional deals? Thoughts on the unit growth outlook into 2025, both in terms of total number and the composition .
“We were positively surprised by the collapse of the pref structure at very reasonable valuations,” said Mr. Ho. “This materially simplifies its corporate structure ... As a result, we foresee M&A picking up. Recall that in 2Q24, DLCG acquired a 70-per-cent stake in Broker Financial Group , a mortgage brokerage, for $3-million plus a $0.5-milllion earnout. We believe other brokerages are M&A candidates at attractive valuations. Otherwise, we believe adjacent businesses are possibilities.
Mr. Van Aelst added: “We are now 7 per cent below the range and expect consensus to follow. That said, 2025/2026 estimated FCF yields look attractive and, at 6.6 times NTM EBITDA, valuation is at an unjustifiably steep discount to historical averages and to the weighted-average of its peers .” “We forecast modest year-over-year revenue growth as market share gains in key verticals are partially offset by the loss of its Under Armour contract,” he said. “We forecast attractive gross margin expansion from lower commodity prices and improved product mix, and favourable year-over-year SG&A performance due to beneficial tax credits and ongoing operating efficiencies. Along with its active NCIB we forecast Q3/24 EPS of $0.84 that is in line with consensus.
“We believe that Gildan’s financial performance continues to illustrate the material advantages of its focus on an industry-leading cost structure. This along with an increase in capacity, support its implied 15-per-cent EPS growth forecast for 2024, despite an industry outlook forecast to be flattish. We believe that Gildan’s low-cost structure, material runway for growth, difficult to replicate assets, and consistent FCF profile warrant an increase in its applied multiple.
Growth Target Revenue Average Valuation Ebitda Rating Popeyes Louisiana Kitchen First Quantum Minerals Ltd. Simpson
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