Stocks to Watch: Metro, Empire (Sobeys) and Safeway (USA)

Metro (MRU.A, $ 67.22): bad news

BMO Capital Markets reiterates a recommendation to "market performance".

Empire Sobeys announces that its subsidiary has entered into an agreement to acquire $ 5.8 billion for Canada Safeway.

Peter Sklar said that Metro does not have the scale of Loblaw and Sobeys and is therefore a member of the buying group IGU, which is also a member of Canada Safeway.

The analyst sees the negative development in that it is clear that Safeway Canada will withdraw from the group, which should significantly reduce the purchasing power of UGI.

His target is $ 68.

Meanwhile, National Bank Financial reiterated a recommendation to "outperform."

Vishal Shreedhar indicates that even if Safeway was the most interesting acquisition, it could be other acquisitions, Overwaitea.

The analyst said it is unclear whether the grocer is available. It states that in the absence of potential targets, Metro could return its excess capital to shareholders.

The target is $ 70.

Empire (EMP.A, $ 67.61): synergies take time

BMO Capital Markets reiterated a recommendation "market performance".

The company announced that its subsidiary Sobeys entered into an agreement for the acquisition of Safeway Canada for $ 5.8 billion.

Peter Sklar calculates the transaction to be dilutive by $ 0.15 per share for fiscal 2014, but will add $ 0.85 to that of 2015 and $ 1.46 the following year (2016).

The analyst pointed out that the contribution to profits is moderate due to the high multiple paid for the issuance of shares of $ 1.5 billion which will proceed Empire, and that it will take three years for synergies provided ($ 200 million) to materialize fully.

The anticipation of earnings in 2014 is reduced from $ 5.69 to $ 5.54 per share. The 2015 climbing from $ 6 to $ 6.84.

The target is raised from $ 65 to $ 75.

Safeway (SWY, $ 23.11 U.S.): burning the furniture to save the rest of the house

Cantor Fitzgerald reiterates a sell recommendation.

The company announced the sale of its Canadian subsidiary for $ 5.8 billion (CAN) at Sobeys, a subsidiary of Empire.

Ajay Jain said that the sale is equivalent to burning the furniture to save the house. He noted that although the transaction will allow Safeway to reduce its debt, it should not be sufficient to increase its profitability. The tax will monopolize further $ 1.8 billion.

The analyst believes that the sale of the Canadian subsidiary, which was the heart of profitability, now puts light on weak U.S. data, which is negative.

The anticipation of earnings in 2014 is reduced by U.S. $ 1.80 to U.S. $ 1.26 per share.

Mr. Jain recognizes that management has managed to manage his income in recent months, but doubt that the thing may continue long.

The target is U.S. $ 14.