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Fleetcor Sees Many Opportunities For Growth

FreightWaves

Fleetcor Technologies (NYSE: FLT), a global business payments company, announced second quarter 2019 adjusted earnings per share (EPS) of $2.85, 11 percent higher year-over-year and $0.05 better than the consensus estimate.

Total revenue in the second quarter of 2019 increased 11 percent year-over-year to $647 million. Adjusted net income increased by 8 percent to $257 million.

"Our second quarter revenues and profits once again finished above our expectations, with adjusted net income per diluted share of $2.85, which was $0.06 above the midpoint of our guidance for the quarter. Organic revenue growth reached 13 percent overall, driven primarily by double digit growth rates in corporate payments, tolls and lodging, and the fuel category had another strong quarter finishing up 9 percent," said Fleetcor's Chairman and Chief Executive Officer Ron Clarke.

Management slightly raised its full year 2019 guidance. They now expect total revenue to increase to a range of $2.625 billion to $2.675 billion (prior $2.6 billion and $2.66 billion) and adjusted EPS of $11.53 to $11.83 (prior $11.47 to $11.77) compared to the current consensus estimate of $11.70. Also, management issued third quarter 2019 guidance of $3.00 to $3.10, which brackets the $3.05 consensus estimate. Lower fuel prices and unfavorable foreign exchange rates are expected to be macro headwinds in the back half of 2019, but these are likely to be completely offset by lower interest expense and the company's prior acquisitions.

Further, management said that is sees a couple of tuck-in acquisitions on the horizon in its fuel, corporate payments and lodging segments. Each deal is likely to be in the range of hundreds of millions of dollars.

"The second quarter of 2019 was another strong quarter for the company, driven by solid performances in all of our business lines. The macro-economic environment came in as expected during the quarter, with the benefit from better than expected fuel spreads and higher fuel prices offsetting the impact of unfavorable exchange rates. We are raising our full-year revenue guidance by $20 million at the mid-point to reflect our over-performance in the second quarter and the acquisition of SOLE Financial early in the third quarter. We are also raising our adjusted net income per diluted share guidance by $0.06 to reflect our second quarter results compared to our expectations," said Fleetcor's Chief Financial Officer Eric Dey.

In early July, Fleetcor acquired SOLE Financial, a payroll card provider that allows instant wage access for employees on a debit card. Management is excited about this deal because SOLE has grown revenue by 30 percent annually. They believe that SOLE will be accretive to earnings in 2020.

Net revenue increased in all divisions with fuel revenue increasing 6 percent year-over-year to $295 million as revenue per transaction increased 10 percent. Corporate payments' net revenue increased 28 percent as transactions increased 23 percent. Net revenue in the Tolls division increased 8 percent year-over-year and lodging net revenue was up 13 percent.

With respect to Fleetcor's exposure to the trucking industry, management said that same-store sales were off 1 to 2 percent in the quarter with the softness in the market increasing sequentially from the first quarter.

Fleetcor owns Comdata, the largest over-the road fuel card provider.

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