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Gas station giant Parkland Corp. has analysts pumping up profit targets

Parkland Corp is the company behind gas station brands including Pioneer, On the Run, Ultramar, and Esso. (THE CANADIAN PRESS/Doug Ives)
Parkland Corp is the company behind gas station brands including Pioneer, On the Run, Ultramar, and Esso. (THE CANADIAN PRESS/Doug Ives) (The Canadian Press)

A pair of analysts have hiked their profit estimates for Parkland Corp’s (PKI.TO) fourth-quarter financial results as the Calgary-based fuel retailer faces challenges at its British Columbia refinery and in its boardroom.

Parkland operates roughly 4,000 fuel and convenience locations across Canada, the U.S. and the Caribbean. It also owns frozen food retailer M&M Food Market. The company behind brands including Pioneer, On the Run, Ultramar, and Esso is due to report its financials later this month, according to RBC Capital Markets analyst Luke Davis.

In a note to clients on Monday, Davis raised his fourth-quarter EBITDA (earnings before interest, taxes, depreciation, and amortization) to $475 million from $458 million. Last week, CIBC Capital Markets analyst Kevin Chiang boosted his fourth-quarter EBITDA forecast to $455 million from $424 million. Both cite strong retail fuel margins as the primary factor.

“We believe Parkland's base business is in good shape heading into 2024, and remains well positioned to achieve prior guidance,” Davis wrote.

Last year, Parkland announced plans to earn $2 billion in adjusted EBITDA in 2024, a year ahead of previous guidance, rising to $2.5 billion in 2028. At the time, in November, Toronto-listed Parkland shares had just snapped a near 52-week high above $44. The stock recently topped $47 per share, putting it within striking range of a new all-time high.

Chiang maintains a $57 per share price target. On Monday, Davis held his price target at $54, while downgrading Parkland shares to “Sector Perform” from “Outperform.”

“We have downgraded Parkland shares on the back of recent stock performance [and] relative valuation, combined with elevated uncertainty related to the company's largest shareholder abruptly removing members from the Board,” he wrote.

Parkland announced Simpson Oil nominees Michael Christiansen and Marc Halley would leave the board on Dec. 31.

New York-based activist investor Engine Capital has been agitating for changes at Parkland since last March, calling out "sustained underperformance" versus rivals like Alimentation Couche-Tard (ATD.TO).

More recently, Engine called for a complete overhaul of Parkland’s board of directors following Christiansen and Halley's resignations. In late January, Parkland announced veteran oil executive Michael Jennings will join the board on Feb. 10.

Meanwhile, Parkland says it was forced to temporarily shut down fuel processing at its Burnaby, B.C. refinery due to a cold weather-related issue on Jan. 21. At one point last year, Engine called for the refinery’s sale, arguing Parkland would be more successful as a pure play gas station and convenience operator. The disruption is expected to last about four weeks.

The shutdown prompted CIBC’s Chiang to lower his 2024 EBITDA guidance from $2.01 billion to $1.98 billion.

Parkland shares fell 2.13 per cent to $46.34 as at 1:59 p.m. ET on Monday.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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