Metro: Temporary Distribution Headwinds Masking Resilient Earnings Growth and Valuation Upside

TD Cowen analyst Michael Van Aelst maintained a Buy rating on Metro Inc. yesterday and set a price target of C$118.00.

Michael Van Aelst has given his Buy rating due to a combination of factors, including resilient earnings growth and an attractive valuation backdrop. He expects Metro to deliver solid adjusted EPS expansion in Q1/F26 despite the temporary disruption from the frozen distribution center, with the drag on same-store food sales and earnings viewed as short term and quantified. In his view, double‑digit EPS growth should resume as early as Q2/F26, which would help close the unusually wide valuation gap versus its main peer, Loblaw. He also anticipates another healthy dividend increase, reinforcing the company’s shareholder-return profile and signaling management’s confidence in future cash flow.

Michael Van Aelst notes that Metro is entering the new fiscal year in a grocery environment that remains broadly supportive, with stable industry volumes and food inflation hovering within a manageable range. Within this context, Metro is still expected to post competitive same-store sales growth in both food and pharmacy, underpinned by strength in pharmacist services, specialty drugs, and beauty. When adjusting for the one-off impact from the Ontario freezer issue, Metro’s underlying performance is seen as largely in line with or better than key peers. Altogether, the combination of recovering earnings momentum, a temporary nature of current operational headwinds, a growing dividend, and room for valuation catch‑up supports his Buy recommendation on the stock.

Based on the recent corporate insider activity of 44 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of MRU in relation to earlier this year.