Following stronger-than-expected fourth-quarter results, TD Cowen analyst Brian Morrison sees encouraging early signs from Canadian Tire Corporation’s (Canadian Tire Corporation Stock Quote, Chart, News, Analysts, Financials TSX:CTC.A) “True North” transformation strategy but remains cautious on near-term upside.
As reported by the Globe and Mail, the analyst maintained his “Hold” rating on the stock but raised his price target to $205.00 from $194.00 following results. The average Street target is $191.50.
In a Feb. 20 note, Morrison said Q4/25 results exceeded his expectations, driven by beats in both Retail and Financial Services. The company reported normalized EPS of $4.47, ahead of his $4.08 estimate and Street consensus of $3.87, though the shares fell 1.2% on the day.
Morrison highlighted “Retail gross margin strength and revenue growth at SportChek/Mark’s” as key positives.
“We are positive on True North drivers including loyalty/partnerships, new store formats, and DaiVID supporting growth at SportChek/Mark’s, and upward revision to its gross margin target (35%-plus),” he said.
However, he added that to become more constructive, he would need to see improved top-line performance at Canadian Tire Retail, which represents more than 70% of ex-petroleum revenue, as well as sustained SG&A operating leverage.
“The positive we take from the Q4/25 results was the Retail gross margin strength and outlook for it to be sustainable,” Morrison said. “To garner further multiple expansion, however, it is our view investors require True North to support heightened revenue growth at CTR … and the realization of sustainable SG&A leverage to support ‘higher quality’ EPS growth in a competitive Retail environment.”
While he sees “attractive value” at current levels over the mid-term as the company works to modernize its retail platform, Morrison believes improved visibility on sustainable 3-5% top-line growth at CTR and clearer operating leverage are needed before the stock can meaningfully outperform consensus or command a higher multiple.
-30-
Haywood Securities analyst Neal Gilmer says lower Canadian cannabis market share is weighing on Tilray Brands (Tilray Brands Stock Quote,… [Read More]
National Bank Financial analyst Baltej Sidhu says Anaergia’s (Anaergia Stock Quote, Chart, News, Analysts, Financials TSX:ANRG) divestiture of two legacy… [Read More]
RBC assistant chief economist Cynthia Leach says the public sector is playing a larger role in Canada’s investment boom than… [Read More]
Research Capital analyst Andre Uddin says Eupraxia Pharmaceuticals (Eupraxia Pharmaceuticals Stock Quote, Chart, News, Analysts, Financials TSX:EPRX) reported another strong… [Read More]
Roth Capital Partners analyst Craig Irwin says VersaBank (VersaBank Stock Quote, Chart, News, Analysts, Financials NASDAQ:VBNK) is nearing a potential… [Read More]
Roth Capital Partners analyst Max Masucci says Rapid Micro Biosystems (Rapid Micro Biosystems Stock Quote, Chart, News, Analysts, Financials NASDAQ:RPID)… [Read More]