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Primo Water Corp PRMW

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Morningstar’s Analysis

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Strong Third Quarter Leads Our Near-Term Outlook Higher for Primo Water; Shares Trade Fairly

Zain Akbari, CFA Equity Analyst

Analyst Note

| Zain Akbari, CFA |

Our $17.80/CAD 22 fair value estimate for no-moat Primo Water should rise by a mid-single-digit percentage after the firm announced solid quarterly earnings, plans to exit the single-use retail bottled water business in the United States, and said it is on track to post $500 million in annual adjusted EBITDA by the end of 2024. Our near-term targets should rise to reflect the strong results, but we contend that the company does not enjoy a sustainable competitive edge, considering its hard-to-differentiate product lineup. We suggest investors await a more attractive entry point.

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Company Profile

Business Description

Primo Water, formerly Cott, is a pure-play water provider that is the product of the March 2020 acquisition of the legacy Primo business by Cott. The firm’s water solutions ecosystem is anchored by an assortment of water dispensers and its water direct business. In the latter, it receives recurring revenue for delivering large-format (3- and 5-gallon) water bottles to residential and commercial customers for use in the dispensers. Supplementary offerings include water exchange, where consumers can exchange or purchase prefilled containers at retail, and water refill, where consumers have access to the network of self-service refill units that Primo manages. Most sales are generated in North America, with the remainder primarily in Europe and Israel.

4221 West Boy Scout Boulevard, Suite 400
Tampa, FL, 33607
T +1 813 313-1732
Sector Consumer Defensive
Industry Beverages - Non-Alcoholic
Most Recent Earnings Sep 30, 2021
Fiscal Year End Jan 1, 2022
Stock Type
Employees 8,880