EPS of 83c largely matched estimates. Revenue of $18.28B was ~1% better than estimated. Increased competitiveness in key regions such as the US could weigh on fuel profitability for Couche-Tard for the remainder of the year. US fuel margins were 48 cents a gallon in fiscal 1Q, a vast improvement sequentially, but 3.8% lower than the same period last year as consumers curb spending, including on fuel (average fill is lower). Yet 1Q will likely be the high-water mark for the region as profitability diminishes to reach mid-40 cents per gallon for 2025, based on our analysts' estimates. As for M&A, uncertainty remains for the potential deal with Seven & i. Couche-Tard cites confidence it can finance the deal, but it may need to make cash a big portion of the financing (possible equity dilution), Seven and i probably will want a high premium, and government scrutiny will be very high. It is far from a done deal and thus hard to make a call. We would consider it a good deal for ATD but only at the right price. Generally, recessions do impact ATD, but less so than most retailers. Volumes can be impacted, but it generally manages slowdowns well. In the 2008 recession, earnings per share dipped only marginally.
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