Loblaw wins price target raise at National Bank

National Bank Financial analyst Vishal Shreedhar thinks things are looking up for Loblaw Companies (Loblaw Companies Stock Quote, Chart, News, Analysts, Financials TSX:L)

As reported by the Globe and Mail Tuesday, the analyst reiterated his “Outperform” rating but raised his one-year price target on L stock from $142.00 to $149.00. With the stock having closed Monday at $133.30, the new target implied a return of 11.8 per cent at the time of publication.

“We continue to maintain a favourable view on Loblaw and recommend it as our preferred grocer supported by several key themes: (1) Benefits from management’s improvement initiatives; (2) Ongoing stable EPS growth, and (3) Favourable trends in discount and drug store (where Loblaw over-indexes),” Shreedhar said.

On the subject of inflation, the analyst said things are normalizing.

““We estimate Q4/23 food store inflation of 4.9 per cent versus 7.2 per cent last quarter,” he wrote. “In December, inflation moderated to 4.7 per cent; we expect further moderation, reflecting a decline in the price of major inputs and base effects,” he said. “Our review of peer commentary suggests: (i) Inflation moderated further; (ii) Ongoing cautious consumer spending behaviour (trade-down, discount, private label, etc.); (iii) Higher promotional penetration, although we understand promotional intensity is largely unchanged; and, (iv) Margin headwinds from shrink (albeit moderating sequentially).”