巴克莱-美股-支付与IT服务业-美国支付、处理器与IT服务业：季度监测-124-39页.pdf
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Equity Research
24 January 2019
CORE
Barclays Capital Inc. and/or one of its affiliates does and seeks to do business with
companies covered in its research reports. As a result, investors should be aware that the
firm may have a conflict of interest that could affect the objectivity of this report. Investors
should consider this report as only a single factor in making their investment decision.
PLEASE SEE ANALYST CERTIFICATION(S) AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 32.
U.S. Payments, Processors & IT Services
Quarterly Fuel Monitor: After Macro
Pain, FLT & WEX Set to Gain
The recent steep fall in fuel prices drove significant pullbacks in both FLT and WEX,
but we believe the setup on a macro-adjusted basis now looks quite compelling, and
that FLT and WEX historically outperform following bouts of crude oil volatility. Our
proprietary Q4 and 2019 fuel price and FX impact analysis shows that both stocks
look inexpensive, with FLT particularly attractive on a macro-adjusted basis (i.e.,
14.7x 2020 PE multiple vs. WEX at 15.4x ’20 P/E).
The best time to get involved is after macro pain is baked in. The fall of fuel prices
since the last earnings report has caused both stocks to significantly underperform the
market. We lay out detailed 2019 EPS bridges for both companies, which show that fuel
and FX represent meaningful headwinds this year. At the same time, we believe the
best time to buy both stocks is after fuel has declined significantly. We include an
analysis that shows that, since 2010, when crude oil prices have fallen 20%+ over a
three-month period, FLT and WEX tend to outperform the market over the following
six- and 12-month periods; FLT increasing 33% and 26%, and WEX increasing 34% and
42% (vs SPX up 11%/17%) on average. While we acknowledge investors are often
hesitant to wade back into these stocks following periods of unusually high fuel price
volatility, we believe, contrarily, this represents the most attractive entry point.
FLT is trading at a macro-adjusted discount to WEX despite much lower fuel
exposure. Recall, FLT has much lower exposure to fuel price volatility than WEX, yet the
stock is trading at a ~100bps 2020 P/E multiple discount to its peer. We believe
investor expectations have reset to what will prove to be very achievable levels for both
FLT and WEX, with 2019 soon setting up quite nicely.
We are lowering our FY19 revenue/EPS estimates on fuel price volatility and FX
along with our Price Targets. We are lowering our FLT revenue/EPS estimates in F19
to $2,511M/$11.50, respectively. We are also lowering our WEX revenue/EPS estimates
in F19 to $1,590M/$8.78, respectively. Our new FLT PT of $236 is 18x our F20 EPS
estimate of $13.36 + DCF. Our WEX PT of $182 is 18x our F20 EPS estimate of $10.29 +
DCF.
4Q18 earnings setup looks good for both stocks, despite mid-quarter macro
volatility. While oil prices tumbled in Q4, we note that retail prices mostly hung on until
the end of December by our measures. Average retail gas/diesel prices came in at
$2.69/$3.25, respectively in Q4 (i.e., -7.9%/-0.1% vs. Q3). Recall ~24%/~14% of
WEX’s/FLT’s total revenues, respectively, are directly exposed to retail fuel prices (with
an additional 5% of FLT’s revenues exposed to fuel price spreads). For both WEX and
FLT, we see offsetting factors in Q4, including widening fuel spreads (benefitting FLT
more), and a more cooperative intra-quarter FX environment.
INDUSTRY UPDATE
U.S. Payments, Processors & IT Services
POSITIVE
Unchanged
For a full list of our ratings, price target and
earnings changes in this report, please see
table on page 2.
U.S. Payments, Processors & IT Services
Ramsey El-Assal
+1 212-526-7144
Ramsey.El-Assal@barclays.com
BCI, US
Damian Wille
+1 212 526 2469
damian.wille@barclays.com
BCI, US
Benjamin Budish, CFA
+1 212 526 2418
benjamin.budish@barclays.com
BCI, US
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