FleetCor Scales New 52-Week High, Fundamentals Encouraging - Analyst Blog

Driven by strong momentum, shares of FleetCor Technologies Inc. FLT hit a new 52-week high of $132.64 on Jun 12. Notably, this global fuel cards and services provider's shares have risen 15.3% since the beginning of 2014 and 14.6% since the company reported its first-quarter results at the beginning of May.

FleetCor also delivered positive earnings surprises in 3 of the last 4 quarters, with an average beat of 4.5%. The momentum of this Zacks Rank #3 (Hold) stock is fueled by the company's robust global network and improved outlook.

Yesterday's closing price represented a robust one-year return of about 51.3% against a return of 17.4% clocked by the S&P 500 index. Average volume of shares traded over the last three months stands at approximately 782.5K.

Earnings Review

On May 1, FleetCor reported first-quarter 2014 earnings per share of $1.12, higher than the Zacks Consensus Estimate of $1.01 and the year-ago figure of 90 cents.

Robust top-line growth of 31% from the prior-year quarter was mainly driven by growth across the primary fuel card businesses – North America, U.K. and Corporate Lodging Consultants CLC acquired in 2009. Despite a 41% rise in operating expenses, the bottom line surged 26%, while asset-base and operating cash flow witnessed appreciation. The company also reduced its debt obligation by about $15 million during the quarter.

Rationale

While risks from higher expenses and leverage remain primary concerns, FleetCor's core growth and competitiveness against larger players are impressive. This is reflected in the raised guidance for 2014, whereby the earnings per share projection was increased by 7 cents from the prior range of $4.90–5.00 a share.

Additionally, FleetCor's card portfolio, capital position and operating leverage remain strong. The recent minority investment in Masternaut Group Holdings Ltd. further strengthens FleetCor's presence in Europe. These positives instill confidence in investors about the company's growth prospects.

Meanwhile, some better-ranked financial stocks include Ladder Capital Corp. LADR, Euronet Worldwide Inc. EEFT and VeriFone Systems Inc. PAY, all of which sport a Zacks Rank #1 (Strong Buy).