Alimentation Couche-Tard (TSX:ATD) has delivered stellar returns over the years, becoming one of Canada’s most consistent performers with 15 years of consecutive gains. But 2024 is proving to be an outlier, with ATD stock trading flat on a year-to-date basis at $77.59 per share, even as the TSX Composite has surged by over 19.3%.
This lack of momentum comes as the Laval-based convenience store and fuel retailing giant, with a market cap of $73.2 billion, is gearing up to release its quarterly earnings on November 25. Given its history of delivering strong earnings and maintaining a disciplined growth strategy, could this earnings event trigger a turnaround for Couche-Tard stock?
In this article, I’ll highlight why this upcoming earnings event might make now the perfect time to consider buying Couche-Tard stock.
What’s affecting Couche-Tard stock in 2024
Despite its years-long track record of consistent growth, many negative factors could be responsible for Couche-Tard stock’s lacklustre performance in the calendar year 2024. The primary culprits appear to be macroeconomic headwinds and operational adjustments, which weighed on its fiscal year 2024 (ended in April 2024) financial performance.
In the fourth quarter of fiscal 2024, the company faced declining same-store merchandise revenues across all regions, particularly a 3.4% YoY (year-over-year) drop in Canada, which it attributed to constrained discretionary spending among low-income consumers. Similarly, its quarterly same-store road transportation fuel volumes also slipped in all key markets.
These factors, coupled with the impact of having one fewer week in its reporting period compared to fiscal 2023, drove its total revenue down by 3.6% YoY in fiscal 2024 to US$69.3 billion. More importantly, its adjusted annual earnings dived by 9.9% to US$2.81 per share, missing Street analysts’ expectations and hurting investors’ sentiments.
Another big reason for driving Couche-Tard stock downward this year could be the lack of clarity surrounding its ambitious attempts to acquire Seven & i Holdings. The Japanese retail giant, which operates the popular 7-Eleven brand, recently declined Couche-Tard’s friendly and non-binding acquisition proposal, putting a damper on the Canadian retailer’s plans to create a leading global retail platform.
Is Couche-Tard stock a buy before November 2025?
Clearly, its fiscal 2024 proved to be a challenging year for Couche-Tard as it grappled with declining revenues and squeezed margins. However, we shouldn’t forget the fact that its financial performance could improve in its fiscal year 2025, which could lead to a sharp recovery in ATD stock.
To give you an idea of why it might be on the brink of a turnaround, let’s consider some promising developments from its first-quarter results. During the quarter ended in June 2024, new acquisitions and higher wholesale fuel sales helped Couche Tard post a strong 17% YoY jump in its total revenue to US$18.3 billion. Although softness in traffic and fuel demand affected its quarterly earnings, its gross profit improved by 8% from a year ago to US$3.2 billion.
Its recent acquisition of over 270 GetGo Café market locations in the U.S. market and ongoing integration of European assets are likely to improve its fundamental growth outlook. If its second-quarter results due on November 25 show continued momentum in revenue growth, operational efficiencies, and synergy realization, Couche-Tard stock could stage a strong rebound.
