You probably haven’t heard of Fleetcor Technologies (NYSE: FLT) stock and for good reason. It is in a boring space that doesn’t get much press coverage. After all, it isn’t involved with building spaceships to go to Mars, nor is it buying companies in the hope to dominate the world.
Instead, Fleetcor Technologies does what it is best at doing, which is managing fuel cards for corporate customers. And smart investors are buying this stock for good reason. In this post, I’ll walk you through these reasons so you too can see the benefit of adding this stock to your portfolio.
Who is Fleetcor Technologies?
As I mentioned, Fleetcor Technologies manages fuel cards for corporate customers. What this means is that they offer credit cards for companies to give to employees when fuel is needed for a company vehicle.
The most popular example would be with transportation companies. A truck company would give its drivers access to a card that allows them to swipe it at a gas station and be on their way. No worrying about carrying money to pay for the fuel and no worrying about submitting an expense report for reimbursement.
And it isn’t just truck companies that can benefit from this service either. When I worked for a rental car company in college, we used a credit card like this as well. I would simply drive to the gas station, swipe the card and be on my way. Instead of myself or my local branch dealing with fuel costs, we let corporate headquarters handle it all.
The bottom line is, partnering with Fleetcor Technologies makes a transportation companies life much simpler.
You might be wondering how exactly Fleetcor Technologies makes money. They do so in two ways.
- First, they collect processing fees for every card swipe
- Second, they get a cut of the gas sale too
So not only do they benefit from the processing fee, but they also benefit from the fuel sale too. And as gas prices rise, so too does the revenue Fleetcor earns.
Why Smart Investors Are Buying This Stock
Now that you know what Fleetcor Technologies does, why are smart investors buying this stock? First, they have many clients not only with transportation companies, but also with gas station chains too. Three of their larger partners are Speedway, BP, and Arco.
And while they have a solid book of business, they continue to grow. For example they recently added Walmart as a customer. This means not only will the company process fuel payments for Walmart employees, but also offer Walmart and Sam’s Club filling stations as their partner chains as well.
In addition to adding customers, they are expanding into other markets too. These include lodging, travel booking and building supplies. The possibilities in these industries are unlimited and adds a lot of potential income to the bottom line.
Finally, the company announced that 33% of its earnings come from overseas business and this area is growing rapidly. I can see how in the coming years international business will make up a bulk of Fleetcor Technologies business.
As these economies continue to grow and develop, the need will be there for Fleetcor’s services.
And don’t think for a minute that driverless cars will have a negative impact on the bottom line either. Quite the opposite in fact. This is because its cards are accepted at charging stations in Europe. In fact, most of the revenue in Netherlands comes from charging stations.
Earnings And Outlook
When the company recently announced earnings, they beat on both earnings per share and revenues. Revenues were up over 17% compared to the prior year.
With all of the great points about Fleetcor, there is one negative. The company is experiencing weak cash flows. The result is a stock price that has been having trouble pushing past its 52 week high.
But weak cash flows shouldn’t be a reason to avoid this stock. The company and the business have a lot of momentum and a bright future.
At the end of the day, smart investors are putting their money into Fleetcor Technologies. With a solid balance sheet and strong earnings, the stock price is only expected to go higher. As a result, smart money is getting into this stock now, before it breaks through its 52 week high. In fact, this might be the best buying opportunity for the stock for some time.
This author has no positions in any stock mentioned and does not plan to open any positions in any stocks mentioned for at least 72 hours after publication of this article.