What does it take to be the best? On Wall Street, it takes a sharp eye for stocks and a clear view of what makes a winning investment – and not every analyst has that.
Glenn Greene, writing on the technology sector for Oppenheimer, is one of the select few analysts to rate five stars from TipRanks. Ranked #3 overall, out of 6,546 rated analysts, Greene’s recommendations have a success rate of 81%. Even better, for the investors who follow him, Greene’s calls have brought an average return of 20.4%.
With this in mind, we wanted to take a closer look at the 5-star analyst’s top picks in the business services sector. These are companies that provide day-to-day financial and payment processing services in the B2B market. While not household names, they are vital players in their niche. Let’s see why Greene sees them as compelling components for your portfolio.
Fiserv, Inc. (FISV)
We’ll start with, Fiserv, a provider of financial services technology for banks, credit unions, leasing and finance companies, retailers, and securities brokers and dealers. Fiserv has been in business since 1984, and reported over $10 billion in revenues for fiscal year 2019.
On May 7, Fiserv reported two items of great interest to investors. First, the company announced that long-time CEO Jeffery Yabuki will step down as of July 1. He will be succeeded by COO Frank Bisignano. In the second news item that day, Fiserv reported Q1 results. At the top line, GAAP revenues increased 151% to $3.77 billion, and GAAP earnings grew by 2% to 57 cents per share. The balance sheet was solid -- Fiserv reported $888 million in net cash for the quarter, compared to $373 million in Q1 2019.
Greene’s assessment of FISV is simple: he rates the stock as a Buy, and believes it has a clear path forward, stating, “FISV has seen steady weekly volume improvement since late March and into May. For perspective, volume declines approximated 30% in late March and have gradually recovered to low double-digit declines; notably better than peer trends, perhaps due to vertical or geographic volume mix. Accordingly, we expect significant but bottoming revenue/profitability pressure in 2Q20 with gradual improvement in subsequent quarters.”
Along with this Buy rating, Greene give FISV a price target of $130, indicating his confidence in a solid 31.5% upside potential.
Fiserv has no fewer than 19 recent analyst reviews, including an impressive 17 Buy ratings against just 2 Holds, and making the analyst consensus a Strong Buy. The average price target, $122.37, implies a 24% premium from the current trading price of $98.86. (See Fiserv stock analysis on TipRanks)
FleetCor Technologies (FLT)
Next on today’s list is FleetCor, a major provider of fuel cards and workforce payment services throughout the developed world, with major clients in the US, the Netherlands, Belgium, and Germany. FleetCor’s client list includes government entities, petroleum companies, and business commercial fleets.
For Q1 2020, FLT showed mixed results. Revenues grew, gaining 6% year-over-year to reach $661.1 million. At the same time, net income fell by 15% yoy to $147.1 million. Due to the pandemic, management withdrew previously published full-year 2020 guidance, citing increased uncertainty in future business activity. Shares have slipped 13% since the earnings release.
In his review of FLT, Greene maintained his Buy rating, along with a $280 price target that implies a strong upside of 30%.
Greene comments, “Notwithstanding near-term COVID-19-related headwinds, FLT remains well positioned to re-capture growth as end client volumes and activity normalize. Additionally, FLT maintains significant capital deployment flexibility, which we suspect could be utilized as we see some evidence of broader growth trends returning.”
The Moderate Buy analyst consensus rating on FLT is based on 13 reviews, including 7 Buys and 6 Holds. The stock is selling for $215.15, and the $270.23 average price target indicates it has room for 26% upside growth over the next 12 months. (See FleetCor stock analysis on TipRanks)
The last stock on today’s list is WEX, an interesting company that provides payment solutions for corporate accounts. WEX started out in the 1980s as a fleet card provider, offering gasoline payment processing for corporate motor pools, and has since expanded to offer a wider range of payment processing and information management for commercial and government vehicle fleets.
Prior to the COVID-19 outbreak, WEX was having a good year. The company saw earnings grow through the first three quarters of 2019, and finished the year with a $2.39 EPS in Q4. The wide-ranging, large-scale economic shutdowns put in place to help fight the pandemic hit WEX hard, however. With so many people under shelter-at-home orders, vehicle traffic declined sharply, as did the need to refuel, service, and maintain those vehicles. WEX reported just $1.62 in Q1 earnings, missing the forecast by over 10% and falling 32% sequentially. The bright spot was the year-over-year change; EPS was up 5.8% from Q1 2019.
However, Glenn Greene believes that WEX remains in a solid position, with positive long-term prospects. The analyst noted, “WEX continues to see strong momentum in its US Health businesses, which realized a minimal impact from the pandemic. WEX also instituted near-term cost-cutting measures that should provide $60–65M of FY20 expense savings… We remain optimistic regarding WEX's diversified growth potential LT, however, are cautious regarding recent NT headwinds.”
To this end, Greene maintained his Buy rating on WEX shares. His $175 price target suggests a robust one-year upside of 51% to the stock.
Overall, WEX shares have a Moderate Buy rating from the analyst consensus. This is based on 11 recent reviews, which break down to 6 Buy and 5 Hold. Shares are priced at $116.09, and the average price target, $174.90, is in line with Greene’s, indicating room for 51% growth. (See WEX stock analysis on TipRanks)
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