TD Securities lowered its price target on Empire Co. Ltd. (EMP-A.TO) to $43 from $45 on Friday, as reported in the Globe and Mail and the full earnings call transcript.
Analyst Michael Van Aelst maintained a Buy rating on shares of the Canadian food retailer following its first quarter results for fiscal 2023.
Van Aelst’s lower target reflects a reduction in his target EPS valuation range to 13.0x from 14.0x.
“It reflects industry trends that we believe remain unfavourable to Empire; i.e., high inflation (expected to persist for several more quarters) and weakening consumer (recession possibility) are pushing customers to the discount channel and lowering the growth outlook for eCommerce,” the analyst said in a note to clients.
“That said, with valuation (11.5x consensus NTM EPS) falling to ~10-year lows – well below EMP’s 14.6x five-year average and a historically wide 4.5/5.5-point discount to L/MRU – these concerns appear well-reflected in Empire’s share price,” Van Aelst said.
“Investors may have to wait until Q3/F23 for an earnings catalyst, but we see modest incremental downside and greater upside should guidance be achieved.”
