FleetCor Technologies 'M&A Potential Intact,' Goldman Sachs Says

In a research report published Monday, analysts at Goldman Sachs looked into FleetCor Technologies, Inc. FLT. They expect the company “to revise its preliminary 2015 revenue guidance below its prior EPS guidance range given oil and FX headwinds.”

However, they believe investors have already anticipated this and priced it into the shares. Therefore, the analysts maintain the stock in their “Conviction List,” with a Buy rating and a $167 12-month price target, as they think “the company can continue to execute on its M&A strategy, with potential catalysts from additional outsourcing among European oil.”

Results And Guidance

As stated above, Goldman Sachs’ analysts expect FleetCor to reduce its 2015 guidance, to reflect the lower fuel prices. The company has approximately 18 percent direct exposure to fuel price. The firm is thus expecting a 5 percent to 6 percent negative impact on earnings, now projected at $6.30 per share for the full fiscal year. This implies a 22 percent year-over-year growth.

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Fourth quarter 2014 results will be reported on February 5, and the firm is modeling revenues of $364 million, versus consensus at $318 million, and EPS of $1.41, compared to the Street’s $1.36. On the opposite, Goldman Sachs expects the company to provide updated fiscal 2015 financial guidance below the Street.

M&A Potential

Despite the anticipated near-term headwinds, Goldman Sachs remains bullish on FleetCor’s long-term prospects. The Buy rating is fueled by the “significant EPS growth” coming from recent acquisitions, including that of Comdata (November 2014).

The analysts believe “the company will continue to increase its margins as it rationalizes acquisitions from 2013 and 2014. Furthermore, management has suggested its M&A pipeline remains active (we believe particularly in Europe), consistent with our [the analysts’] view that FleetCor still has room to do up to $1 bn of additional deals through 2015.”