Today, it’s Quebec’s National Day. For this occasion, I suggest to you two Quebec-based companies that are outperforming the market: Quebecor Inc. (TSX: QBR.B) and Lassonde Industries Inc. (TSX: LAS.A).
Quebecor Inc.
Quebecor is one of the largest media conglomerates in Canada. The company has three key business segments: telecommunications, including its core asset Videotron; media, which includes TVA Group; and sports and entertainment, its smallest segment.
Quebecor’s first-quarter results showed a strong increase in profit. Indeed, net income attributable to shareholders amounted to $56.7 million ($0.24 per share) in the first quarter of 2018 compared with $3.9 million ($0.02 per share) in the same period of 2017. Adjusted operating income was up 9.5% to $407.4 million.
The telecommunications segment was the main profitability driver in the quarter.
The telecommunications company has reached an agreement to repurchase the Caisse de dépột et placement du Québec’s 18.5% stake in Quebecor Media Inc. The transaction — valued at $1.69 billion — will improve the stock’s valuation, removing Quebecor’s holding company discount.
Last month, Quebecor announced a 100% dividend hike, increasing the dividend to $0.055 per share from $0.0275 per share for a current yield of 0.6%.
While this is a strong hike, you can expect the dividend to keep increasing fast over the coming years as Quebecor has set a dividend target of 30-50% of the company’s annual free cash flows to be achieved gradually by the end of a four-year period. The stock shows a 10-year average annual dividend-growth rate of 16%.
Quebecor’s earnings are estimated to grow by 25.5% this year and by 11% next year. The company’s return on equity is very high, reaching almost 70%, so the company is very profitable.
The stock is trading at a discount with a P/E of 15.8, which is much lower than its five-year average of 94.3.
Year to date, the stock has outperformed its telecom peers, rallying over 13%. In comparison, the share price of Rogers Communications Inc. is down 1.5%, BCE Inc. is down 8%, and Telus Corporation is down 0.2%.
Quebecor’s stock has a 15-year compound annual growth rate of return (CAGR) of 14%.
Lasssonde Industries Inc.
Lassonde Industries develops, manufactures, and markets a wide range of fruit and vegetable juices and beverages, including Oasis and Rougement brands as well as specialty food products and wine.
The juice and beverage producer posted a net profit attributable to shareholders of $14.5 million ($2.08 per share) for its 2018 first quarter, an increase of 11.2% compared to the same quarter a year earlier. The company benefited from the tax reform in the United States.
Lassonde continues its expansion in the United States and is now making 58% of its sales in this country. At the end of last month, Lassonde acquired Old Orchard Brands for US$148.9 million. This juice and beverage producer based in Michigan employs nearly 100 people and had sales of US$103.3 million last year.
In addition to producing ready-to-drink juices, Old Orchard Brands is the second-largest player in the United States in the frozen concentrated juice sector, which will allow Lassonde to enhance its brand portfolio in this market segment.
For Lassonde, this is a third acquisition in the United States since 2011. The company first bought Clement Pappas for US$414 million, and in 2014 it acquired Apple & Eve for US$150 million.
Lassonde’s earnings are estimated to grow by 18.1% this year and by 10.6% next year.
The juice producer recently increased its quarterly dividend by 32.8% from $0.61 to $0.81. The current dividend yield is around 1%, and the 10-year average annual dividend-growth rate is 14.2%.
The stock is up 13% year to date and has a 15-year CAGR of 20%.
