Reasons to Retain FLEETCOR (FLT) Stock in Your Portfolio
FLEETCOR Technologies, Inc. FLT has had an impressive run over the past year. The stock has gained 43.6%, outperforming the 13.5% growth of the industry it belongs to and the 20.4% rise of the Zacks S&P 500 composite.
The company has an expected long-term (three to five years) earnings per share growth rate of 12.3%. Its earnings are expected to register growth of 5.3% in 2023 and 13.7% in 2024.
FleetCor Technologies, Inc. Price
FleetCor Technologies, Inc. price | FleetCor Technologies, Inc. Quote
Factors That Bode Well
FLEETCOR’s presence in multiple continents lets it tap various new customer markets. It provides the company with cost economies and lets it acquire assets to leverage cost synergies, use new practices and launch new products.
The company’s business is currently banking on organic growth, revenue retention, client acquisition and selling value-added products through the company’s various payment solutions. In the third quarter of 2023, organic revenue growth was 10%, driven by a 20% increase in corporate payments.
FLEETCOR has a consistent track record of share repurchases. In 2022, 2021, 2020 and 2019, the company repurchased shares worth $1.41 billion, $1.36 billion, $849.9 million and $694.9 million, respectively. Such moves instill investors’ confidence and positively impact earnings per share.
FLEETCOR’s current ratio (a measure of liquidity) at the end of third-quarter 2023 was pegged at 1.02, higher than the current ratio of 0.99 reported in the prior-year quarter. The improvement in the current ratio is a welcome development as it implies that the company has enough cash to meet its short-term obligations. A current ratio of more than 1 often indicates that the company will be easily paying off its short-term obligations.
A Risk
FLEETCOR is seeing higher interest expenses due to an increase in LIBOR rate and additional borrowings. In 2022, interest expenses came in at $165 million, indicating 44.8% from the year-ago reported figure. In 2023, the company expects interest expense to be in the range of $340-$350 million. Hence, the bottom line is likely to remain under pressure going forward. We expect interest expenses for 2023 to be 342.6 million, more than 100% above the year-ago figure.
Zacks Rank and Stocks to Consider
FLEETCOR currently carries a Zacks Rank #3 (Hold).
Investors interested in the Zacks Business Services sector can consider the following better-ranked stocks:
Gartner IT: The Zacks Consensus Estimate for Gartner’s 2023 revenues indicates 7.9% growth from the year-ago figure. Its earnings are expected to decline 1.9% year over year. The company beat the consensus estimate in each of the four quarters, with the average surprise being 34.4%.
IT carries a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Broadridge Financial Solutions BR: The Zacks Consensus Estimate for Broadridge’s fiscal 2024 revenues indicates 7.7% growth from the year-ago figure. Its earnings are expected to grow 10.1% year over year. The company beat the consensus estimate in three of the past four quarters and matched once, with the average surprise being 5.4%.
BR currently carries a Zacks Rank of 2.
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