George Weston Ltd

WN: XTSE (CAN)
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Morningstar Rating for Stocks Fair Value Economic Moat Capital Allocation
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George Weston Earnings: Easing Food Price Inflation Led to Normalizing Top-Line Growth; Shares Rich

We plan to maintain our CAD 185 per share fair value estimate for no-moat George Weston after absorbing its third-quarter results, with sales and adjusted EBITDA up 1.5% and 6.9%, respectively. As food prices continue to normalize, our view remains in place that main subsidiary no-moat Loblaw (over 90% of total sales) will see its sales trajectory reverting to the low-single-digit range consistent with historical averages. The other subsidiary, Choice Properties, may also see sales moderating given its significant sales exposure to tenants associated with Loblaw, despite a slightly better outlook in its industrial portfolio. On a consolidated basis, we continue to expect the firm to deliver low-single-digit sales growth and a 6% operating margin over the next 10 years; shares look overvalued.

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