Long-term Outlook Remains Strong

Article Excerpt

CANADIAN TIRE CORP. $74 (Toronto symbol CTC.A; Conservative Growth Portfolio, Consumer sector; Shares outstanding: 81.6 million; Market cap: $6.0 billion; SI Rating: Above average) earned $1.30 a share before unusual items in the third quarter of 2007, up 12.1% from $1.16 a year earlier. The gains came mainly from cost savings, as same-store sales at its core Canadian Tire stores fell 2.7%. Warmer-than-usual weather in central Canada hurt demand for fall and winter goods. However, overall revenue rose 1.5%, to $2.05 billion from $2.02 billion. The stock has moved down from its recent peak of $87 on fears of softening retail conditions in Ontario and Quebec, which account for 65% of the company’s total revenue. However, higher oil prices will improve profits at Canadian Tire’s gas stations. Earnings are also growing strongly at its financial operations. Canadian Tire should earn $4.75 a share in 2007, which implies a p/e of 15.6. The $0.74 dividend yields 1.0%. Canadian Tire is a buy. buy…