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Here's Why You Should Hold FLEETCOR Technologies (FLT)
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FLEETCOR Technologies, Inc. has an expected long-term (three to five years) earnings per share growth rate of 12%. Moreover, its earnings are expected to register 21.9% growth in 2021.
Factors Driving FLEETCOR
FLEETCOR’s top line continues to grow organically driven by increase in both volume and revenues per transaction in some of its payment programs. The company continues to witness solid organic revenue growth, driven by robust double-digit growth across its product categories — fuel, corporate payments, tolls and lodging. Notably, organic revenue growth was 11%, 10%, 9% and 8% respectively in 2019, 2018, 2017 and 2016.
Acquisitions have been acting as a key growth catalyst. In 2019, the company acquired Nvoicepay, SOLE Financial and Travelliance and made a tuck–in acquisition in its lodging business. While Nvoicepay should expand FLEETCOR’s corporate payments business with full disbursement accounts payable cloud platform, SOLE Financial is expected to extend FLEETCOR’s payroll and card portfolios and expand its addressable market, thus enabling it better serve small and medium-sized as well as larger businesses. Travelliance is expected to expand its lodging business across new international markets and the tuck–in acquisition will expand its presence into the airline segment and add international hotel coverage and capabilities. Notably, during 2019, the company witnessed $40 million of additional revenues from acquisitions completed in the year.
Effective management execution has helped the company build cash, cash equivalents and restricted cash of $1.55 billion, with no long-term debt to clear-off as of Mar 31, 2020. This significant amount of cash provides FLEETCOR the flexibility to pursue strategic acquisitions and other related investments.
Cash-rich companies not only guarantee protection but are also likely to reward shareholders from their deep cash balances. In first-quarter 2020, the company repurchased shares worth $530.24 million. In 2019, 2018 and 2017, the company had repurchased shares worth $694.9 million, $958.7 million and $402.4 million, respectively.
Risks
FLEETCOR continues to witness higher interest expense due to increase in LIBOR rate and additional borrowings for shares repurchase and to fund Cambridge acquisition (completed in 2017). During 2019, interest expense of $150.05 million increased 8.3% year over year. The same rose 29.3% year over year in 2018. This is likely to keep the bottom line under pressure going forward.
Vast global presence makes FLEETCOR vulnerable to the risks associated with foreign currency exchange rate fluctuations. Multiple acquisitions result in some integration risk. The company’s fuel card, workforce payment solutions and gift card businesses are affected by seasonality.
Zacks Rank and Stocks to Consider
FLEETCOR currently carries a Zacks Rank #3 (Hold).
The long-term expected earnings per share (three to five years) growth rate for CoreLogic, SPS Commerce and SailPoint is 12%, 15% and 15%, respectively.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
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Here's Why You Should Hold FLEETCOR Technologies (FLT)
FLEETCOR Technologies, Inc. has an expected long-term (three to five years) earnings per share growth rate of 12%. Moreover, its earnings are expected to register 21.9% growth in 2021.
Factors Driving FLEETCOR
FLEETCOR’s top line continues to grow organically driven by increase in both volume and revenues per transaction in some of its payment programs. The company continues to witness solid organic revenue growth, driven by robust double-digit growth across its product categories — fuel, corporate payments, tolls and lodging. Notably, organic revenue growth was 11%, 10%, 9% and 8% respectively in 2019, 2018, 2017 and 2016.
Acquisitions have been acting as a key growth catalyst. In 2019, the company acquired Nvoicepay, SOLE Financial and Travelliance and made a tuck–in acquisition in its lodging business. While Nvoicepay should expand FLEETCOR’s corporate payments business with full disbursement accounts payable cloud platform, SOLE Financial is expected to extend FLEETCOR’s payroll and card portfolios and expand its addressable market, thus enabling it better serve small and medium-sized as well as larger businesses. Travelliance is expected to expand its lodging business across new international markets and the tuck–in acquisition will expand its presence into the airline segment and add international hotel coverage and capabilities. Notably, during 2019, the company witnessed $40 million of additional revenues from acquisitions completed in the year.
Effective management execution has helped the company build cash, cash equivalents and restricted cash of $1.55 billion, with no long-term debt to clear-off as of Mar 31, 2020. This significant amount of cash provides FLEETCOR the flexibility to pursue strategic acquisitions and other related investments.
Cash-rich companies not only guarantee protection but are also likely to reward shareholders from their deep cash balances. In first-quarter 2020, the company repurchased shares worth $530.24 million. In 2019, 2018 and 2017, the company had repurchased shares worth $694.9 million, $958.7 million and $402.4 million, respectively.
Risks
FLEETCOR continues to witness higher interest expense due to increase in LIBOR rate and additional borrowings for shares repurchase and to fund Cambridge acquisition (completed in 2017). During 2019, interest expense of $150.05 million increased 8.3% year over year. The same rose 29.3% year over year in 2018. This is likely to keep the bottom line under pressure going forward.
Vast global presence makes FLEETCOR vulnerable to the risks associated with foreign currency exchange rate fluctuations. Multiple acquisitions result in some integration risk. The company’s fuel card, workforce payment solutions and gift card businesses are affected by seasonality.
Zacks Rank and Stocks to Consider
FLEETCOR currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Business Services sector are CoreLogic , SPS Commerce (SPSC - Free Report) and SailPoint Technologies Holdings, Inc. . All the stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The long-term expected earnings per share (three to five years) growth rate for CoreLogic, SPS Commerce and SailPoint is 12%, 15% and 15%, respectively.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>