Analyst Note| Nicholas Johnson, CFA |
Heading into no-moat Primo’s fourth-quarter earnings print, we believe investors were looking for: 1) any inkling of recovery in the commercial business; and 2) ongoing execution against cost synergies for the transformational merger a year ago. The results (ahead of FactSet consensus on both the top and bottom lines) and commentary were encouraging in both regards, and the firm looks set to deliver another year of solid performance in 2021, irrespective of the timing and shape of the broader post-pandemic recovery. We plan to adjust our $15.10 (CAD 20) fair value estimate nominally, reflecting time value as we roll our model for 2021 as well as puts and takes in near-term guidance. Though shares are down modestly at the time of writing, the margin of safety is too thin, in our view, and thus should not entice prospective investors just yet.