Valued at a market cap of $8.5 billion, Canadian Tire (TSX:CTC.A) is among the hottest firms in Canada. For the reason that begin of 1995, the TSX inventory has returned 1,110% to shareholders, simply outpacing the broader markets. Nevertheless, if we alter for dividend reinvestments, cumulative returns are nearer to 2,100%.
Whereas Canadian Tire inventory has delivered outsized features to long-term shareholders, it has returned lower than 60% within the final 10 years. As historic returns shouldn’t matter a lot to present and future traders, let’s see the place the TSX dividend inventory might be in three years.
Is Canadian Tire inventory a superb purchase proper now?
Canadian Tire offers a spread of retail items and providers in Canada. Regardless of a difficult macro surroundings in 2024, it reported an adjusted earnings per share of $12.62, up from $10.37 in 2023. Within the fourth quarter (This autumn), it returned to progress, with retail gross sales and comparable gross sales (excluding petroleum) up greater than 1% throughout all banners.
“The quarter got here to us as we anticipated,” Chief Govt Officer Greg Hicks informed analysts. “In an unsure client financial system, we managed the controllables, architecting gross sales by means of strategic promotion and efficient margin administration.”
Canadian Tire maintained its gross margin at 36% for This autumn, holding according to its “North Star” goal of 35.9%, regardless of elevated promotional depth at Canadian Tire Retail (CTR). Administration efficiently diminished normalized retail SG&A by $15 million, pushed by decrease provide chain prices, headcount financial savings, and diminished advertising bills.
In a optimistic signal for client engagement, the corporate’s Triangle Rewards program confirmed momentum, with loyalty gross sales rising 4% in This autumn in comparison with 1% for the complete 12 months. Energetic membership grew to 11.7 million prospects who shopped extra ceaselessly and spent greater than in 2023. Triangle MasterCard holders elevated spending at CTR by 2.4%, representing the primary improve in card spending throughout the Canadian Tire household of firms in six quarters.
What’s subsequent for the TSX inventory?
Looking forward to 2025, Canadian Tire faces uncertainty round potential U.S. tariffs, with 15% of its items sourced instantly from the US.
Chief Monetary Officer Gregory Craig famous that whereas Canadian Tire is getting into the 12 months with plans for “flat to modest top-line progress,” it is going to monitor financial circumstances and client demand over the following 100 days earlier than finalizing shopping for assumptions for the autumn/winter season.
Hicks emphasised the corporate’s preparedness to handle by means of tariff challenges: “Our broad assortment contains a number of manufacturers at varied worth factors and sourcing from totally different international locations with various tariffs and international trade publicity. It’s this range that gives some pure substitutability between merchandise and helps us defend each ourselves and our prospects from among the pricing pressures.”
Canadian Tire will quickly element its new company technique, constructing on the $1.8 billion invested since 2022 to advance its retail omnichannel community, provide chain, information, and know-how capabilities.
Analysts monitoring Canadian Tire inventory anticipate adjusted earnings to increase from $12.62 per share in 2024 to $16 per share in 2027. At present, the TSX inventory is priced at 11.6 occasions trailing earnings. If priced at an identical a number of, CTC inventory ought to commerce at $186 per share in March 2028, indicating an upside potential of 25% from present ranges.
Canadian Tire additionally pays shareholders an annual dividend of $7.10 per share, indicating a yield of 4.8%. These payouts have risen at an annual price of 13.3% within the final 20 years.
