Canadian Tire Stock Rallies on Strong Q2 Financial Results

Canadian Tire Corporation (TSX: CTC.A) currently trades at a PE of 15.58x, price to sales of 0.83x and price to book of 2.17x

SmallCapPower | August 11, 2017: Canadian Tire Corporation (TSX: CTC.A) Thursday reported robust second-quarter earnings aided by strong sales growth in June as well as improved margins due to operational efficiencies and cost control. Consolidated revenue increased 1.8% to $3.4 billion, with retail segment revenues increasing 1.6% to $3.1 billion and revenues from the Property (CT REIT) and Financial Services segments rising 10% and 3.8% to $112 million and $288 million, respectively.

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Consolidated retail sales rose 3% to $4.1 billion, driven by a 6.4% increase in Petroleum retail sales due primarily to higher per litre gas prices. Excluding Petroleum, consolidated retail sales increased 2.5% attributable to increased sales at Canadian Tire, Mark’s, and FGL Sports. The Company’s key operating metric, same store sales increased 1.8% on a consolidated basis, with Mark’s reporting the highest growth at 4.0%, followed by FGL Sports  at 2.6% and Canadian Tire Retail at 1.4%.

Consolidated gross margin increased 60 bps to 33.7% due to increased revenue at Mark’s, FGL Sports, and the Financial Services segment and an improved gross margin rate at Canadian Tire, partially offset by lower margins at Petroleum.

Owing to higher revenues and improved margins, earnings per share rose 14.1% to $2.82, above the consensus estimate of $2.52.

Operating capital expenditures decreased to $70.7 million during the quarter from $126.7 million in the prior year quarter and the Company’s guidance for the full year is $400-$425 million. Canadian Tire declared a dividend of $0.65 per share payable on December 1, 2017 to shareholders of record as of October 31, 2017.

Canadian Tire currently trades at a PE of 15.58x, price to sales of 0.83x and price to book of 2.17x. Shares of Canadian Tire jumped nearly 6% post earnings to close at $149.89 on August 10, 2017, and its stock added another 1.4% on Friday.

Disclosure: Neither the author nor any of the principals at Small Cap Power, or their family members, own shares in any of the companies mentioned above.

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