Canadian Tire (CTC.A) AI Stock Analysis

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TSE:CTC.A Dividends

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Canadian Tire

(TSX:CTC.A)

74Outperform

Canadian Tire scores a 73.6, reflecting a solid financial foundation with strong cash flow and appealing valuation. While the earnings call shows positive results and strategic progress, caution is advised due to potential external risks like tariffs and economic uncertainties. Technical indicators suggest limited momentum, requiring close monitoring of market conditions.

Positive Factors

Balance Sheet Improvement

CTC will have a much improved balance sheet post the Helly Hansen divestiture and has recently begun repurchasing stock.

Financial Performance

Good periods of winter weather likely drove a positive comp for CTC Retail's Q1/25 SSS.

Liquidity

The sale of Helly Hansen for $1.276 billion will help to further deleverage and provide a good liquidity buffer.

Negative Factors

Currency and Cost Pressures

Gross margin will likely face some headwinds next year from a weaker Canadian dollar, higher freight costs and elevated promotional intensity.

Macroeconomic Risks

A full-blown tariff war with the U.S. would be a significant negative for the Canadian economy.

Tariff Concerns

Discretionary spending may slow further due to tariff uncertainties.

Canadian Tire (CTC.A) vs. S&P 500 (SPY)

Market Cap

$8.34B

Dividend Yield4.8%

Average Volume (3M)324.25K

Price to Earnings (P/E)9.2

Beta (1Y)0.80

Revenue Growth-1.79%

EPS Growth318.70%

CountryCA

Employees13,973

SectorConsumer Cyclical

Sector Strength58

IndustrySpecialty Retail

Share Statistics

EPS (TTM)15.96

Shares Outstanding51,669,792

10 Day Avg. Volume385,323

30 Day Avg. Volume324,255

Financial Highlights & Ratios

PEG Ratio0.03

Price to Book (P/B)N/A

Price to Sales (P/S)0.73

Price to Cash Flow (P/CF)3.40

P/FCF Ratio3.10

Enterprise Value/Market CapN/A

Enterprise Value/RevenueN/A

Enterprise Value/Gross ProfitN/A

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

$162.90

Price Target Upside11.01% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering10

Canadian Tire Business Overview & Revenue Model

Company DescriptionCanadian Tire Corporation, Limited provides a range of retail goods and services in Canada. It operates in three segments: Retail, CT REIT, and Financial Services. The Retail segment retails automotive maintenance products and accessories, parts, tires as well as automotive repair and roadside assistance; kitchen, home organization, decor and essentials, home electronics, pet, and cleaning and consumable products; tools, hardware, paint, electrical, plumbing, home environment, and smart home products; and outdoor recreation, exercise, footwear and apparel, hunting, fishing, camping, and sporting goods. It also retails Christmas trees, lights and decor, Halloween décor and costumes, yard care and maintenance, and snow removal equipment; patio furniture, barbeques, pools, trampolines, outdoor power equipment and tools, plants and gardening supplies; backyard amusement, pool fun, and toys and games; gasoline; sporting goods and active wear; casual and industrial apparel and footwear; and outerwear, base-layer, and workwear. This segment offers its products under the Canadian Tire, Canadian Tire Gas, Mark's, PartSource, Helly Hansen, Party City, and SportChek brand names. This segment also participates in loyalty programs, as well as sells its products online. The CT REIT segment operates as a closed-end real estate investment trust that holds a portfolio of 368 properties comprising Canadian Tire stores, Canadian Tire anchored retail developments, industrial properties, a mixed-use commercial property, and development properties. The Financial Services segment provides financial and other ancillary products and services, including consumer credit cards, in-store financing, insurance products, and retail and broker deposits; and savings accounts and guaranteed investment certificates. Canadian Tire Corporation, Limited was founded in 1922 and is headquartered in Toronto, Canada.

How the Company Makes MoneyCanadian Tire primarily generates revenue through its extensive network of retail stores, which sell a broad range of products. The company's key revenue streams include the sale of automotive parts and accessories, hardware and home improvement items, sports and leisure equipment, and clothing and footwear. Canadian Tire also earns significant income from its financial services division, which offers credit cards that generate revenue through interest and fees. The company's retail operations benefit from its loyalty program, Triangle Rewards, which encourages customer retention and repeat purchases. Additionally, Canadian Tire's real estate investments contribute to its earnings, as it owns and manages a substantial portfolio of commercial properties. Strategic partnerships and exclusive brand agreements further enhance its product offerings and competitive positioning in the Canadian retail market.

Canadian Tire Financial Statement Overview

Summary

Canadian Tire's financial performance is characterized by strong cash flow management and an improving return on equity, offset by challenges with declining revenues and fluctuating profitability. The balance sheet shows moderate leverage, but the decrease in stockholders' equity may pose future risks. Continued focus on operational efficiency and revenue growth is crucial.

Income Statement

Positive

Canadian Tire's income statement shows stable gross profit margins around 34-35% over recent years, indicating effective cost management in the face of decreasing revenues. However, the net profit margin has fluctuated, with a substantial drop in the most recent year to 5.4% from 1.3% the previous year, primarily due to a significant drop in EBIT. Revenue growth has been inconsistent, with a notable decline of 7.5% in 2023. The flat EBIT and EBITDA margins in the latest year suggest challenges in operational efficiency.

Balance Sheet

Positive

The balance sheet reflects a moderate debt-to-equity ratio of 1.28, indicating a balanced approach to leveraging equity. However, there is a downward trend in stockholders' equity over the past year, which could signal financial risk. The return on equity has improved significantly to 14.4% from 3.8%, reflecting better utilization of equity to generate profits. The equity ratio stands at 27.7%, showing that a substantial portion of the company's assets are financed by equity.

Cash Flow

Positive

Canadian Tire's cash flow statement is strong, with a significant increase in free cash flow by 108.2% in the most recent year, indicating effective cash management. The operating cash flow to net income ratio is robust at 2.3, suggesting that the company generates ample cash from its operations relative to its net income. The free cash flow to net income ratio is also favorable at 1.6, highlighting efficient cash conversion.

Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Breakdown
Income Statement		Total Revenue
16.36B	16.66B	17.81B	16.29B	14.87B
	Gross Profit
5.62B	5.38B	6.10B	5.84B	5.08B
	EBIT
0.00	1.26B	1.67B	1.79B	1.27B
	EBITDA
2.13B	1.48B	2.58B	2.64B	2.14B
	Net Income Common Stockholders
887.70M	213.30M	1.04B	1.13B	751.80M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
575.90M	488.40M	490.10M	2.34B	1.93B
	Total Assets
22.24B	21.98B	22.10B	21.80B	20.38B
	Total Debt
7.91B	8.81B	7.72B	7.09B	7.16B
	Net Debt
7.46B	8.50B	7.41B	5.35B	5.87B
	Total Liabilities
15.15B	15.53B	15.06B	15.29B	14.54B
	Stockholders Equity
6.16B	5.55B	5.62B	5.12B	4.50B
Cash Flow		Free Cash Flow
1.43B	685.10M	-268.60M	1.04B	2.01B
	Operating Cash Flow
2.06B	1.35B	566.00M	1.81B	2.44B
	Investing Cash Flow
-264.10M	-747.80M	-329.90M	-736.50M	-848.00M
	Financing Cash Flow
-1.64B	-621.00M	-1.66B	-653.40M	-462.70M

Canadian Tire Technical Analysis

Technical Analysis Sentiment

Negative

Last Price146.75

Price Trends

50DMA

147.04

Negative

100DMA

151.54

Negative

200DMA

149.79

Negative

Market Momentum

MACD

-0.42

Negative

RSI

48.92

Neutral

STOCH

76.37

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:CTC.A, the sentiment is Negative. The current price of 146.75 is below the 20-day moving average (MA) of 147.50, below the 50-day MA of 147.04, and below the 200-day MA of 149.79, indicating a bearish trend. The MACD of -0.42 indicates Negative momentum. The RSI at 48.92 is Neutral, neither overbought nor oversold. The STOCH value of 76.37 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:CTC.A.

Canadian Tire Peers Comparison

Overall Rating

UnderperformOutperform

Sector (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MRU	77 Outperform	C$22.40B	22.86	14.26%	1.35%	2.31%	4.45%
ATD	76 Outperform	C$67.60B	18.98	18.66%	1.04%	11.62%	-8.08%
CTC.A	74 Outperform	$8.34B	9.20	15.17%	4.80%	-1.79%	318.70%
Sector *	60 Neutral	$6.54B	11.34	3.27%	4.27%	2.37%	-20.86%

* Consumer Cyclical Sector Average

Performance Comparison

TSE:CTC.A

Canadian Tire

147.92

19.27

14.98%

LBLCF

Loblaw Companies

154.13

45.20

41.49%

DLMAF

Dollarama

121.23

38.24

46.08%

TSE:ATD

Alimentation Couche-Tard Inc

71.95

-5.06

-6.57%

TSE:MRU

Metro Inc.

103.76

35.33

51.63%

CDNTF

Canadian Tire

151.74

-23.55

-13.43%

Canadian Tire Earnings Call Summary

Earnings Call Date: Feb 13, 2025 | % Change Since: -6.77% | Next Earnings Date: May 8, 2025

Earnings Call Sentiment Neutral

The earnings call highlighted strong financial performance and successful strategic initiatives, such as the growth of the Triangle Rewards program and supply chain savings. However, concerns about potential tariffs and their impact on the economy, as well as specific challenges like weather and the Canada Post strike, present significant risks. Overall, the sentiment is balanced with optimism about growth and caution regarding external uncertainties.

Highlights

Strong Earnings Performance

Achieved a normalized EPS of $4.07 in Q4, bringing annual EPS to $12.62. This represents a significant improvement over 2023.

Triangle Rewards Program Success

Loyalty sales grew by 4% in Q4, with members spending more and redeeming ECTM 30% higher than three years ago.

Supply Chain Modernization Savings

DC transformations in Calgary and Montreal drove $20 million in savings in 2024.

Helly Hansen Revenue Growth

Revenue increased by 12%, with strong performance in the U.S. market and direct-to-consumer channels.

SG&A Expense Reduction

Normalized retail SG&A was down $15 million in the quarter, reflecting strong cost control measures.

Lowlights

Potential Impact of Tariffs

The looming threat of tariffs poses a risk to the Canadian economy and consumer confidence, potentially affecting retail demand and bank write-offs.

Weather-Related Sales Challenges

Unusually warm weather in October and November led to lower sales in weather-dependent categories.

Canada Post Strike Impact

The strike led to over 100 basis points negative impact on comps and incurred incremental costs for alternative distribution.

Increased Write-Off Rates

The write-off rate at the bank increased to 7%, up 90 basis points compared to last year.

Company Guidance

During the Canadian Tire Corporation's earnings call for the fourth quarter and full year of 2024, the company provided several key metrics and insights into its performance and outlook. The company reported a normalized earnings per share (EPS) of $4.07 for Q4, bringing the annual EPS to $12.62. Sales were driven by strategic promotions and effective margin management, contributing to a 1% growth in retail sales and a 1.3% increase in retail revenue. The Triangle MasterCard spend at Canadian Tire Retail (CTR) increased by 2.4%, and the loyalty sales grew by 4% in Q4. The company also highlighted a 12% revenue increase at Helly Hansen and a 1.8% increase in comparable sales at Mark’s. Despite a challenging consumer environment, the company managed to decrease SG&A expenses by $15 million in the quarter and reduced corporate inventory by $135 million. Looking ahead, Canadian Tire remains cautiously optimistic about the future, monitoring potential impacts from tariffs and aiming to maintain its North Star gross margin rate of 35.9% while focusing on strategic growth initiatives and capital plans.

Glossary

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.