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Primo Water Corp PRMW

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Morningstar’s Analysis

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Primo Continues to Navigate the Pandemic Adeptly in Q4; 2021 Should Be More of the Same

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.

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Company Profile

Business Description

Primo Water, formerly Cott, is a pure-play water provider that is the product of the March 2020 acquisition of the legacy Primo business by Cott. The firm’s water solutions ecosystem is anchored by an assortment of water dispensers and its water direct business. In the latter, it receives recurring revenue for delivering large-format (3- and 5-gallon) water bottles to residential and commercial customers for use in the dispensers. Supplementary offerings include water exchange, where consumers can exchange or purchase prefilled containers at retail, and water refill, where consumers have access to the network of self-service refill units that Primo manages. Most sales are generated in North America, with the remainder primarily in Europe and Israel.

4221 West Boy Scout Boulevard, Suite 400
Tampa, FL, 33607, Canada
T +1 813 313-1732
Sector Consumer Defensive
Industry Beverages - Non-Alcoholic
Most Recent Earnings Dec 31, 2020
Fiscal Year End Dec 28, 2020
Stock Type
Employees 8,880