How are energy investors positioned?
On Tuesday, Citi analyst Steven Zaccone adjusted the price target for Valvoline shares (NYSE:VVV), lowering it to $38.00 from the previous $41.00 while maintaining a Neutral rating. Currently trading at $34.30, the stock sits below analyst targets ranging from $38 to $48. According to InvestingPro data, Valvoline appears slightly undervalued based on its Fair Value analysis. Ahead of Valvoline’s fiscal second quarter earnings report scheduled for May 8, Zaccone shared insights on the company’s performance and investor expectations.
Zaccone noted that the consensus on Wall Street for Valvoline’s same-store sales (SSS) for the second quarter and the full year is generally aligned with Citi’s estimates. However, he anticipates that the company’s EBITDA and EPS might fall short due to a history of poor flow-through. This concern is particularly noteworthy given that InvestingPro data shows seven analysts have recently revised their earnings expectations downward for the upcoming period. Despite this, he believes that investor expectations are relatively low for the upcoming earnings announcement.
High-frequency data has revealed inconsistent store traffic for Valvoline since its last earnings report. Nonetheless, Zaccone highlighted that the auto parts retail and services sector is traditionally a defensive segment, likely to remain resilient even if consumer spending declines. Valvoline’s stock performance has not been as defensive compared to its auto parts retail peers, which raises some concerns.
The analyst outlined several points that Valvoline needs to clarify for investors, including the transaction outlook for the second half of the year if the macroeconomic environment weakens, the pricing outlook in the face of tariffs, and the competitive landscape should consumer spending deteriorate. Additionally, Zaccone mentioned the need for updates on unit growth plans and cost inflation, especially in light of higher labor costs reported by industry peers like GPC and ORLY, as well as an announcement regarding a new Chief Financial Officer.
As Valvoline prepares to reveal its fiscal second quarter earnings next week, stakeholders will be looking for these clarifications to better understand the company’s position and future prospects. The company maintains a "GOOD" overall Financial Health Score according to InvestingPro, with revenue growing at nearly 12% over the last twelve months. Investors seeking deeper insights can access comprehensive analysis and additional ProTips through InvestingPro’s detailed research reports, available for over 1,400 US stocks including Valvoline.
In other recent news, Valvoline Inc . reported first-quarter earnings that exceeded analyst expectations, with adjusted earnings per share of $0.32, surpassing the consensus estimate of $0.30. Revenue reached $414 million, exceeding projections of $396.83 million and marking an 11% year-over-year growth. Valvoline added 35 new stores during the quarter, including 14 franchise locations, contributing to an 8.0% increase in system-wide same-store sales compared to the previous year. Meanwhile, the U.S. Federal Trade Commission issued a second request for information regarding Valvoline’s planned acquisition of Breeze Autocare, extending the waiting period under antitrust regulations. Valvoline aims to finalize this acquisition, valued at approximately $625 million, by the second half of fiscal 2025. On the analyst front, Piper Sandler maintained an Overweight rating on Valvoline with a $45 price target, while TD Cowen initiated coverage with a Buy rating and a $40 target, both firms highlighting Valvoline’s growth potential in the quick lube industry. However, Moody’s altered Valvoline’s outlook to negative from stable, citing the debt-funded acquisition of Breeze Autocare, while affirming the company’s Ba2 rating. Despite these developments, Valvoline’s strategic direction and operational strengths continue to be recognized by analysts and investors alike.
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