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On Wednesday, BofA Securities updated its outlook on WEX Inc. (NYSE:WEX), raising the price target slightly to $164 from $163, while keeping a Neutral rating on the stock. The revision follows WEX Inc.’s announcement of the preliminary results of its tender offer, which concluded on Tuesday, March 25. According to InvestingPro data, WEX’s stock has declined 25% over the past six months and currently trades near its 52-week low of $146.03.
WEX Inc. has confirmed it will repurchase approximately 4.87 million shares at $154 each, totaling around $750 million. This buyback accounts for roughly 12.5% of the company’s outstanding shares. The outcome of the tender offer aligns with the initial forecasts made at the time of the offer’s announcement. The aggressive share buyback strategy comes as InvestingPro analysis indicates the stock is currently undervalued, with the company maintaining a P/E ratio of 19.98 despite its profitable operations.
According to BofA Securities, the $750 million repurchase will take the place of the previously authorized $400 million buyback plan. Analysts predict that WEX will not engage in further stock buybacks in 2025, as the company plans to prioritize reducing its debt and investing in its operations.
The tender offer’s completion also suggests that WEX is unlikely to pursue near-term mergers and acquisitions. Instead, the company is expected to focus on reducing its leverage over the next 12 to 18 months, as indicated by the analyst’s remarks.
In other recent news, WEX Inc. has completed an upsized offering of $550 million in senior unsecured notes due 2033, with an interest rate of 6.500% per annum. Concurrently, WEX has amended its credit agreement to establish an Incremental Term Loan B-3 Facility amounting to $450 million. The proceeds from these financial maneuvers, along with cash on hand, are intended to fund a tender offer to repurchase up to $750 million of its common stock, repay $250 million of its senior secured credit facilities, and cover related expenses. The tender offer, structured as a modified Dutch auction, allows shareholders to tender their shares at prices between $148 and $170.
Moreover, WEX has announced plans to launch the tender offer on February 26, 2025, contingent upon securing at least $750 million in debt financing. Analysts have weighed in on these developments, with Mizuho (NYSE:MFG) Securities lowering WEX’s stock price target to $170 while maintaining an Outperform rating. Similarly, Keefe, Bruyette & Woods adjusted their price target to $200, also keeping an Outperform rating, following WEX’s revised earnings per share estimates for 2025 and 2026. These financial strategies and analyst adjustments highlight WEX’s proactive approach to capital management and shareholder value enhancement.
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