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Bull of the Day: Valvoline (VVV)

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Valvoline Inc. (VVV - Free Report) is seeing momentum in its business since it was spun-off from Ashland last year. This Zacks Rank #1 (Strong Buy) recently beat and raised full year guidance.

Valvoline operates and franchises more than 1,070 Valvoline Instant Oil Change centers in the United States. It also markets Valvoline lubricants and automotive chemicals as well as SynPOwer synthetic motor oil and Zerex antifreeze.

Acquisition of 28 New Stores

On Feb 3, Valvoline closed on its previously announced acquisition of 28 Time-It Lube quick-lube stores. Time-It Lube has a heavy presence in East Texas and Louisiana, where it was founded in 1987.

It employed 200 people.

The acquisition will grow Valvoline stores in areas where it previously didn't have a big presence.

A Big Beat in the First Quarter

On Jan 26, Valvoline reported its fiscal first quarter results and surprised on the Zacks Consensus by 16%, or $0.05. Earnings were $0.35 compared to the consensus of $0.30.

The quarter was driven by growth in premium product sales, an increase in stores, strong same-store-sales results and volume growth in international markets.

In North America, lubricant volume was up 2% to 24.1 million gallons.

Same store sales at the quick lubes rose 9% overall, with 9.5% for the company-owned stores and 8.9% for franchised stores. Store count rose to 1,076 at the end of the quarter, a gain of 120 stores year over year due to the acquisition of Oil Can Henry.

In its international business, lubricant volume grew 12% to 13.7 million gallons. Emerging markets volume rose 16% with mature markets volume gaining by 8%.

Raised Full Year Guidance

The strong performance in the first quarter meant the company could raise its EPS guidance for the full year.

Revenue is now expected to rise 4% to 7% versus prior guidance of 3% to 5%.

The analysts like what they heard. 4 estimates were raised since the report with the Zacks Consensus jumping to $1.37 from $1.31. That's earnings growth of 4.9%.

Still Has an Attractive Valuation

Shares have rebounded off their 2016 lows but even with the boost in the stock, it still has an attractive valuation.



Valvoline has a forward P/E of 17 which is under that of the S&P 500 which is averaging a P/E of 18.1.

Shareholders are also rewarded with a dividend, which is currently yielding 0.8%.

For investors looking for a play on the auto industry that doesn't involve the car makers, Valvoline is one to keep on the short list.

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