On Thursday, North West Co Inc. (TSX:NWC) experienced a slight adjustment in its stock outlook. CIBC has increased the price target on the shares to C$44.00 from the previous C$43.00. Despite this change, the firm has maintained a Neutral rating on the stock.
The company recently reported first-quarter earnings that aligned with expectations, showing a stronger performance in food sales which helped to balance a slower growth in gross margin percentage. The current focus for investors and analysts is on the impact of government support programs.
Notably, the distribution of funds from the $1.8 billion drinking water settlement has commenced and is set to increase throughout 2024. This development is anticipated to boost gross margin sales in Canada in the upcoming quarters.
Another significant financial injection is expected from the First Nations Child and Family Services settlement, which amounts to $23.3 billion. Still, the exact timing of these payments remains uncertain, with expectations that they could be more than 18 months away. In light of these factors, CIBC has made a modest upward revision in its estimates for North West Co.
The analyst from CIBC commented on the adjustments, stating, "Our estimates increase modestly and our price target moves to $44 (from $43). Upside and yield are solid, though we remain cautious on valuing support payment upside. NWC is Neutral rated."
Investors are now looking at the potential for North West Co's sales to increase following these government settlements. While the prospect of additional funds presents an opportunity for growth, the cautious stance reflected in the Neutral rating suggests a watchful approach to the company's valuation in light of these anticipated government support payments.
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