On Friday, UBS initiated coverage on Metro Inc . (TSX:MRU:CN) (OTC: MTRAF) with a Neutral rating and set a price target of Cdn$98.00. The firm highlighted Metro's significant presence in the Canadian food and drug retail sector, where it holds approximately a 10% market share. As a leading player in Quebec and Ontario, regions that comprise about 60% of Canada's population, Metro operates a diverse portfolio of conventional, discount, and specialty store formats.
The company also has the potential to expand its pharmacy operations, which include Jean Coutu and Brunet, as pharmacists are expected to receive additional prescribing authorities. Despite a period of earnings softness due to investments in supply chain improvements that tempered fiscal year 2024 earnings per share growth, UBS anticipates that Metro will resume its 8-10% earnings per share growth trajectory in fiscal year 2025.
However, the firm also noted that Metro's current valuation is relatively high, and the competition for attracting value-conscious consumers is intensifying. Given these factors, UBS believes that the risk/reward profile for Metro's stock is balanced at its current price levels. This assessment reflects the company's solid market position against the backdrop of competitive and operational challenges.
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