UPDATE: Deutsche Bank Initiates Coverage On FleetCor Technologies

Deutsche Bank initiated coverage on FleetCor Technologies, Inc. FLT Friday with a Buy rating and $178 price target.

Analysts led by Ashish Sabadra felt that FleetCor “remains well positioned to deliver double-digit organic growth from expanding internationally as well as accelerated growth in the US driven by investments in sales and marketing and selective price increases.

“FLT grew adjusted EBITDA margins on average by 200bps annually over the last four years by focusing on profitable customers, operating leverage and cost take-out, delivering leading adjusted EBITDA margins of ~60 percent. We expect the company to deliver sustained margin expansion going forward which along with deleveraging should deliver EPS growth at a CAGR of 20 percent+.”

Sadbadra added that the “international fleet payments market is highly fragmented which provides FLT an opportunity to expand by acquiring portfolios from Oil companies. FLT is expanding into 13 new countries in Europe with the acquisition of the Shell SME portfolio which bodes well for capturing the European market (roughly 1.5x the US market).”

Regarding risks related to lower oil prices, “Although ~17 percent of FLT’s revenues post Comdata acquisition remain exposed to lower fuel prices, the agreements with certain merchants as well as revenues based on fuel spreads act as a natural hedge. For example, in 2009, despite over 40 percent decline in crude oil prices, the net revenue impact was only $1m (0.3 percent of revenues),” according to the analyst report.

FleetCor Technologies recently traded at $152.05, up 1.6 percent.