FleetCor Technologies Hits The Gas In More Markets


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"I'm a travelin' man," Ricky Nelson warbled in 1961. "I've made a lot of stops all over the world."

If he'd had access to the services ofFleetCor Technologies ( FLT ), he might have saved money on those worldly travels.

FleetCor provides fuel cards and payment services designed to help customers track and control costs. Its operating model is pretty simple: Truck fleets need fuel, and service stations need to be paid. FleetCor links the two with cards and card processing services that free drivers from relying on cash or personal credit cards.

The company charges trucking firms a monthly fee and the gas stations a usage fee when drivers fill up. The cards also help truckers track vehicle locations, monitor fuel consumption patterns and identify fueling locations.

In The Fast Lane

Demand for these services has helped FleetCor deliver a years-long run of double-digit revenue and profit growth and given it the financial juice to keep expanding into new markets.

During the first quarter, it reported 31.1% year-over-year growth in U.S. net revenue and 37% growth in the international arena. The company has seen its annual revenue more than double over the past four years.

Meanwhile, FleetCor's stock price is trading at record highs amid talk that it might be poised for even more growth. On Wednesday morning, its shares rose 3% to an all-time high of 138.19 after reports surfaced that it is looking to buy Comdata, a corporate payment-processing company, for more than $3 billion.

Comdata provides payment solutions for companies in the construction, health care and fleet industries.

According to a report from Reuters, other suitors for Comdata include private equity firmsCarlyle Group ( CG ) and Silver Lake Partners.

FleetCor, which has remained mum on the reports, is no stranger to buyouts. It set the tone in 2000, the year of its founding, when it acquired the U.S. fuel card platform Fuelman and launched the ARCO fleet card.

The company now operates in 43 countries, has around 5,100 global employees, serves more than half a million commercial accounts and boasts millions of cardholders.

Its partners range from major oil companies such as ARCO,Royal/Dutch Shell (RDSA),BP ( BP ) andChevron ( CVX ) to one-outlet fuel suppliers.

FleetCor's business is now split about evenly between the U.S. and elsewhere. Analyst Philip Stiller of Citi Investment Research reckons the growth rate of FleetCor's international segment will eventually outstrip the domestic component.

"The longer-term opportunities emphasize the international prospects," Stiller told IBD in a phone interview.

FleetCor has grown its international operation through a combination of partnerships and acquisitions. Over the last couple of years alone it has made a handful of deals to expand its footprint overseas.

Its most recent deal came in May, when it bought part of Shell's SME fuel card customer portfolio in Germany. One benefit of the deal is that FleetCor will have exclusive rights to sell new fuel card accounts to specific fleet segments in Germany, which should help boost its business there.

Last year FleetCor entered Australia via the acquisition of GE Capital's Fleet Card, a multibranded fuel card business that lets drivers use any of about 6,000 stations offering multiple fuel brands throughout the country.

FleetCor also established a presence in neighboring New Zealand in 2013 by acquiring CardLink, a fuel-card issuing and payment processing company.

Other 2013 acquisitions expanded FleetCor's operation in Brazil, the UK and Russia.

Strong Organic Growth

During the first quarter, FleetCor's international revenue rose to $127.5 million from $93.1 million the previous year. The international business accounted for 50% of total revenue during the quarter, up from 48% a year earlier.

"Results in our International business were positively impacted by strong organic growth in our UK businesses, which posted double-digit revenue growth over last year," Eric Dey, FleetCor's chief financial officer, said on a Q1 conference call with analysts.

FleetCor officials did not respond to requests for comment for this article.

Whither Russia?

During the May 1 call, Dey also downplayed the impact that regulatory changes and U.S. sanctions have had, or could have, on the company's business in Russia, saying FleetCor "does not appear to be adversely affected" by those developments.

"However, we are affected indirectly as the Russian economy is softening, and we are experiencing a slowdown in volumes," Dey said. "Our international business has also been impacted by unfavorable foreign exchange rates in Russia as well as Brazil."

Analyst Stiller noted that Russia accounts for only 5% of FleetCor's business.

FleetCor's overall revenue during the first quarter climbed 31% from the previous year to $253.9 million. It was the second straight quarter of accelerated top-line growth. Earnings rose 24% to $1.12 a share, topping estimates for $1.01.

FleetCor is slated to report Q2 results after the close Thursday. Analysts polled by Thomson Reuters expect EPS of $1.25, up from $1 a year earlier. Revenue is seen climbing 24% to $273.7 million.

Full-year earnings are expected to rise 25% in 2014 and another 17% in 2015.

FleetCor has "traditionally delivered on the upside," said Stiller, who looks for even more upside in the third and fourth quarters.

He added that few companies in FleetCor's sector enjoy its margins, and that the company has "very consistently" improved its margin outlook over time -- testimony to its strong competitive position.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing Investing Ideas
Referenced Stocks: FLT , CG , BP , CVX

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