CTC/A CN

Canadian Tire Corp Ltd

Finance/Real Estate, Consumer


Presented:03/13/2019
Price:CA$146.08
Cap:$7.35B
Current Price:CA$157.81
Cap:$7.02B

Presented

Date03/13/2019
PriceCA$146.08
Market Cap$7.35B
Ent Value$12.02B
P/E Ratio13.62x
Book ValueCA$69.41
Div Yield2.84%
Shares O/S62.92M
Ave Daily Vol281,687
Short IntN/A

Current

PriceCA$157.81
Market Cap$7.02B
Canadian Tire Corp. Ltd. operates as a general merchandise retailer for gasoline, automotive, sports and home products. The company operates through three segments: Retail, CT REIT and Financial Services. The Retail segment comprises of the living, playing, fixing, automotive, seasonal & gardening, apparel and sporting goods categories. The Financial segment services markets a range of Canadian tire branded credit cards, including the Canadian tire options mastercard, the cash advantage mastercard, the gas advantage mastercard and the sport chek mastercard. financial services also markets insurance and warranty products. The CT REIT segment involves owning, developing and leasing income-producing commercial properties. Canadian Tire was founded by Alfred Jackson Billes and James William Billes in September 15, 1922 and is headquartered in Toronto, Canada.

Publicly traded companies mentioned herein: Amazon.com Inc (AMZN), Canadian Tire Corp Ltd (CTC/A CN), Lowe’s Corporation (LOW), Royal Bank of Canada (RY CN; RY), Toronto-Dominion Bank/The (TD CN; TD)

Highlights

The presenter is short shares of Canadian Tire Corp (CTC/A CN) and sees multiple ways to “win” over the next 12 months due to the deteriorating macroeconomic environment in Canada. With the economy slowing, the housing sector is finally at risk of meaningful deterioration. And, CTC has a large credit card business, which contributes ~30% of earnings. This is a source of underappreciated risk, as a rise in charge-offs will hurt both the Finco’s results and retail sales. Comps have been deteriorating recently, as Amazon is aggressively expanding in Canada. So, the timing and risk/reward seem right for the short. If the bearish scenario plays out, CTC’s earnings could fall well short of consensus estimates for 2019 and 2020 (nearly C$12.88 and ~C$14, respectively), and the stock could fall by 40% or more.

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