Inside the Market’s roundup of some of today’s key analyst actions
With rising interest rates offsetting its “impressive” organic growth, Canaccord Genuity analyst Mark Rothschild lowered his recommendation for to “hold” from “buy” in response to recent share price appreciation and its current valuation.
Mr. Rothschild thinks same-property NOI “remains strong despite rising operating costs” and same-property occupancy continues to make gains. However, he trimmed his 2023 and 2024 estimates based on a greater-than-anticipated rise in interest costs.“Over the past three months, InterRent’s units have generated a total return of 16.6 per cent, compared to the return of 12.7 per cent for its Canadian apartment REIT peers,” he said. “The REIT’s units currently trade at 29.
“We expect the higher-for-longer food inflation, dovetailing with the ripple effects of the rate shock on consumers, to drive a further increase in the focus on value through mid-to-late calendar 2023 ,” the analyst added. “The challenge for Empire against this backdrop is that not only does it remain the most full-service-weighted grocer among its Canadian peer group, but it also has the smallest drug retail business , which leaves the Company with few options to mitigate current headwinds.
“Continued strong revenue growth was offset by gross margins pressure, resulting in a more muted EPS growth year-over-year. EPS guidance for 2023 came-in below expectations and calls for limited growth year-over-year of 2.5 per cent, explaining the negative share price reaction today, in our view. Inefficiencies stemming from investments in supply chain are expected to be larger than previously expected, limiting gross margins upside near term.
That led him to cut his target for Pet Valu shares by $1 to $44, reiterating a “buy” rating. The average on the Street is $46.17.
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