FleetCor Technologies: Charge Ahead With FLT
FLT's fuel card business is my top pick for 2014 (and probably beyond)
It’s hard to be as bullish about a company as I am about FleetCor Technologies (FLT), but I like the business, I like the company and I love the growth prospects of this stock.
For those who aren’t familiar, FLT operates in a niche market with tremendous profit potential: fuel cards.
FleetCor is best known for providing payment processing services and private-label fuel credit cards to gas station operators and owners of vehicle fleets. In addition to fleet cards, the company’s other payment products include food cards and corporate lodging discount cards. Currently, FleetCor serves more than half a million commercial accounts, covering millions of cardholders across North America, Europe, Africa and Asia. Last year alone, the company processed nearly 304 million transactions.
FleetCor went on a buying spree in 2013. Last spring, FLT agreed to buy out Telenav’s (TNAV) mobile business — an operation that serves 8,000 business clients by tracking the location of mobile workers in field-based businesses. FleetCor aims to adopt the business to add value to its ongoing fuel card programs.
Also earlier in 2013, FLT scooped up GE Capital Australia’s fuel card business. GE Capital’s Fleet Card is currently accepted at 6,000 fuel outlets and 7,000 automotive service centers across the country. This deal is expected to add 3 cents per share to FLT earnings.
But that’s not all — Fleetcor then revealed in late October that it had bought out Epyx, which specializes in fleet maintenance in the United Kingdom. Epyx operates a vehicle repair network of 9,000 service garages and provides an Internet-based system to fleet operators across the pond.
And FleetCor’s earnings history and prospects are strong.
In the most recent quarter (reported Oct. 30), FLT reported earnings of $1.08, which were up 30% year-over-year and 10% better than analyst estimates. Revenues also jumped 20% to $225.2 million and topped the Street consensus.
For the upcoming quarter, while the average business services company is headed toward a 92% drop in earnings, FleetCor is expected to post 29% growth. Analysts have been scrambling to revise their estimates up as the company continues its buying spree. This means that we’ll likely see more earnings surprises from FLT stock; after all, the company has beaten estimates for numerous consecutive quarters.
FLT gained an incredible 120% in 2013, but still trades at a relatively reasonable 24 times forward earnings.
FleetCor Technologies is my top pick for 2014 and probably for the next few years.
2014 is not the year to pick a sector or the whole S&P 500 and ride it. It will be a stock picker’s environment that rewards focus on fundamentals.Continue Reading