Loblaw Companies Hold Rating: Balancing Near-Term Uncertainties with Long-Term Growth Potential

Loblaw Companies (LBLCF – Research Report), the Consumer Defensive sector company, was revisited by a Wall Street analyst yesterday. Analyst Tamy Chen from BMO Capital maintained a Hold rating on the stock and has a C$180.00 price target.

Tamy Chen has given her Hold rating due to a combination of factors that impact Loblaw Companies’ outlook. One of the primary considerations is the company’s expected earnings performance, which is anticipated to be at the midpoint of its 8-10% EPS growth target for 2025. This is largely based on projected food sales growth driven by inflation and the opening of approximately 60 new locations, although there are uncertainties about how quickly sales will ramp up, particularly in the new small format No Frills stores.
Chen also notes that while there is potential for gross margin expansion, there is a cautious approach due to the industry’s overall earnings outlook as it transitions past the period of high inflation-driven growth. Despite these challenges, there is optimism about Loblaw’s opportunities in expanding pharmacy services, which provides a positive long-term growth trajectory. As a result, the Hold rating reflects a balanced view of the near-term uncertainties and the potential for secular growth in the future.