In today’s unpredictable economic landscape, many investors are seeking refuge in defensive stocks. Those resilient companies that can weather economic storms. Three Canadian stalwarts that fit this bill are Waste Connections (TSX: WCN), Dollarama (TSX: DOL), and Metro (TSX: MRU). Let’s delve into recent performances and future prospects.
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Waste Connections
Waste Connections, a leader in waste management services, has been on a growth trajectory. In the fourth quarter of 2024, the defensive stock reported revenues of $2.260 billion, up from $2.036 billion in the same period the previous year. This uptick is largely attributed to strategic acquisitions and effective pricing strategies. However, the quarter wasn’t without challenges.
The defensive stock faced an operating loss of $199.2 million, primarily due to a $601.6 million impairment related to the early closure of a landfill. Despite this, adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) rose to $731.9 million, showcasing robust operational performance.
For the full year of 2024, Waste Connections’s revenue reached $8.920 billion, marking an 11.2% increase from 2023. Net income stood at $617.6 million, a decrease from the previous year’s $762.8 million, mainly due to the aforementioned impairments. The defensive stock’s adjusted EBITDA for the year was $2.902 billion, reflecting a 15% year-over-year growth. Looking ahead, Waste Connections projects 2025 revenues between $9.45 billion and $9.60 billion. The net income is anticipated to range from $1.186 billion to $1.224 billion.
Dollarama
Dollarama, Canada’s go-to dollar store chain, has capitalized on consumers’ shift towards value shopping. In the third quarter of 2024, Dollarama’s net sales rose by 5.7% to $1.56 billion as cost-conscious customers flocked to its stores for discounted household and grocery items. Net earnings per share increased by 6.5% to 98 Canadian cents, reflecting the company’s ability to maintain profitability amidst rising costs.
Earlier, in the second quarter of 2024, Dollarama reported a 7.4% increase in net sales, reaching $1.56 billion. The defensive stock’s gross margin improved to 45.2% from 43.9% in the same period the previous year, thanks to lower shipping and logistics costs. Net earnings per share for this quarter were $1.02, surpassing analysts’ expectations. Dollarama has maintained its fiscal 2025 comparable sales growth forecast of 3.5% to 4.5%, indicating confidence in sustained consumer demand for affordable essentials.
Metro
Metro, a prominent player in the Canadian grocery and pharmaceutical sectors, continues to exhibit stability. As of writing, Metro’s stock price stands at $95, reflecting a market capitalization of approximately $21.07 billion. The defensive stock’s trailing price-to-earnings (P/E) ratio is 22.23, with a forward P/E of 19.96, suggesting expectations of earnings growth. Metro’s consistent performance underscores its role as a defensive stock, providing essential goods that remain in demand regardless of economic conditions.
Metro’s strong presence in the grocery and pharmaceutical sectors further solidifies its position as a defensive stock. Its ability to maintain and even grow its revenues amidst economic fluctuations makes it an attractive option for investors seeking stability. While challenges exist, these companies have shown a consistent capacity to adapt and thrive, reinforcing their positions as pillars of the Canadian economy.
