Shoppers Target Price Raised on Strong 4Q Results

Analyst Irene Nattel of RBC is expecting “strong fourth quarter results” from Shoppers Drug Mart Corp.(SHDMF.PK), and has raised her target price on the shares to C$66 from C$64.

She predicts Shoppers will announce a 25% increase to its dividend on Feb. 5 to C$0.20 per quarter.

Shoppers is clearly trading at a premium to [U.S. chains] Walgreens (WAG) and CVS (CVS), but below the lower end of its long-term historical valuation range despite consistent same-store sales performance and earnings delivery, implying that the market is essentially discounting a sharp slowdown in earnings growth in 2008.

Due to an apparently weak start to cold and flu season, the analyst, who rates Shoppers as her top pick among retail stocks, shaved her same store sales and profit assumptions for the fourth quarter slightly to C$0.70 per share from C$0.72. For fiscal 2008 and 2009, she altered her per share estimates to C$2.63 and C$3.03 respectively from C$2.60 and C$3.