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Will World Fuel (INT) Sustain Its Solid Momentum in 2020?

Zacks Equity Research

World Fuel Services INT is likely to retain its growth trajectory in 2020, courtesy of impressive earnings performance in 2019 and robust key end markets.

Buoyed by these factors, this Zacks Rank #2 (Buy) stock has skyrocketed 104.1% in the past year compared with the industry’s 5.3% growth.

Growth Driver

The company is one of the leading fuel suppliers in the three primary transportation segments — marine, aviation and land. World Fuels recently announced that it will acquire Universal Weather and Aviation’s UVair fuel business worth $170 million. The UVair acquisition will complement World Fuel’s aviation operations and also add customers. Per the agreement, Universal Weather and Aviation will collaborate with World Fuels to supply fuel to their respective clients. Being in similar business and sharing some of the airports, the parties’ collaboration is anticipated to be less risk-prone with higher chances of outperformance.

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The Miami-based global provider of fuel logistics is well positioned to capitalize on growth and M&A opportunities, courtesy of a balance sheet and cash flow perspective. Further, the company is set to experience a sequential improvement in its U.K. and Kinetic business activities during the fourth quarter.

These growth drivers strengthen World Fuel’s share in the fuel market, especially in the United States.

Estimate Revisions

Analysts are bullish on the stock as it has been witnessing solid upward estimate revisions. In the past 90 days, the Zacks Consensus Estimate for the company’s 2019 and 2020 earnings has moved up 4.18% and 0.34%, respectively.

Upbeat Q3 Performance

The stock has a great record of positive earnings surprises, surpassing the Zacks Consensus Estimate in the last four quarters. In its last earnings report on Oct 30, 2019, World Fuel reported adjusted earnings per share (EPS) of 77 cents that beat the consensus mark of 69 cents. The bottom-line figure increased 22.2% on a year-over-year owing to higher income generated from the operations of aviation, land and marine segments.

Impressive Growth Projections

The Zacks Consensus Estimate for World Fuel’s 2019 earnings is currently pegged at $2.49, which suggests growth of 18.00% from the year-ago period’s figure. The same for 2020 is pegged at $2.92, which indicates year-over-year rise of almost 17.5%.

Positive Earnings Surprise History

World Fuel Services outpaced the Zacks Consensus Estimate in the trailing four quarters, the average being 16.20%.

World Fuel Services Corporation Price and EPS Surprise

 

World Fuel Services Corporation Price and EPS Surprise
World Fuel Services Corporation Price and EPS Surprise

World Fuel Services Corporation price-eps-surprise | World Fuel Services Corporation Quote

 

Strong Balance Sheet

In the third quarter, the company generated cash and cash equivalents of $218.5 million. Notably, it’s debt to capitalization ratio was 26.7%. The company managed to lower its net debt to EBITDA ratio to 1.44 times, down from 1.49 times in the year-ago quarter.

We believe that these factors will continue to keep World Fuel in investors’ good books.

Other Key Picks

Some other top-ranked players in the energy space are Magellan Midstream Partners, L.P. MMP, Kosmos Energy Ltd KOS and Marathon Oil Corporation MRO. All of these stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

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Magellan Midstream Partners, L.P. (MMP) : Free Stock Analysis Report
 
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Zacks Investment Research