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FleetCor Technologies (FLT) Down 9.5% Since Last Earnings Report: Can It Rebound?

Zacks Equity Research

A month has gone by since the last earnings report for FleetCor Technologies (FLT). Shares have lost about 9.5% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is FleetCor Technologies due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

FLEETCOR Surpasses Q2 Earnings Estimates, Revenues Lag

FLEETCOR Technologies reported mixed second-quarter 2020 results wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same.

Adjusted earnings of $2.28 per share outpaced the consensus estimate by 5.6% but decreased 20% year over year. Revenues of $525.1 million missed the consensus mark by 0.1% and decreased 19% year over year on a reported basis and 17% on a pro-forma and macro-adjusted basis.

The quarterly performance was significantly impacted by coronavirus-related shutdowns across the globe. Volumes reduced initially in the second quarter with most businesses’ volumes starting to recover as the quarter progressed. The macro-economic environment unfavorably impacted revenues during the reported quarter by almost $22 million, thanks to unfavorable foreign-exchange rates.

Revenues in Detail

Segment wise, revenues from North America came in at $357.43 million, down 14.5% year over year. Internationally, revenues of $92.57 million decreased 26.3% year over year. Revenues from Brazil declined 27.5% to $75.15 million.

Product-category wise, fuel revenues of $249.8 million went down 15% year over year on a reported basis and 16% on a pro-forma and macro-adjusted basis.

Corporate Payments revenues of $92.6 million decreased 18% year over year on a reported basis and 17% on a pro-forma and macro-adjusted basis.

Tolls revenues of $64.8 million declined 25% year over year on a reported basis but improved 3% on a pro-forma and macro-adjusted basis.

Lodging revenues of $40.6 million decreased 19% year over year on a reported basis and 37% on a pro-forma and macro-adjusted basis.

Gift revenues of $26.5 million decreased 26% year over year on a reported as well as a pro-forma and macro-adjusted basis.

Other revenues of $50.8 million decreased 25% year over year on a reported as well as a pro-forma and macro-adjusted basis.

Operating Results

Operating income decreased 28.4% from the prior-year quarter to $212.81 million. Operating income margin declined to 40.5% from 45.9% in the prior-year quarter.

Balance Sheet & Cash Flow

FLEETCOR exited second-quarter 2020 with cash, cash equivalents and restricted cash of $1.19 billion compared with $1.55 billion at the end of the prior quarter. The company generated $382.14 million of net cash from operating activities. Capital expenditures totaled $18.61 million. In the reported quarter, FLEETCOR repurchased shares worth $27.12 million.

2020 Guidance

Considering the uncertainty in market recoveries due to the coronavirus outbreak, FLEETCOR has not updated its full-year 2020 guidance. The company expects volume in the second half of the year to improve as the economy improves. However, revenues in the second half of the year are anticipated to recover more slowly than volume, since bigger enterprise accounts with lower rates will recover faster than the company’s SMB portfolio. Also, lower-than-expected fuel prices and foreign-exchange rates are expected to weigh on revenues.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

VGM Scores

At this time, FleetCor Technologies has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, FleetCor Technologies has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.



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