WEX (WEX) Shares Cheap When Looking to '17 - Oppenheimer

Oppenheimer analyst, Glenn Greene, cut estimates on (NYSE: WEX) while claiming the stock is cheap on 2017 earnings. No change to Outperform rating but PT is cut to $85 from $103.

During 2015, WEX's daily stock price exhibited a correlation of nearly 0.9 with the spot price of WTI crude oil. No such correlation existed in the four years before CY15 and WEX's fuel price-related revenue exposure has declined meaningfully from 50% in 2010 to ~25-30% pro forma for the EFS acquisition (expected to close April '16).

Shares currently trade at ~15x and 9.5x Street consensus NTM P/E and EV/EBITDA, respectively, representing discounts of ~19/15% to prior three-year averages. That said, consensus estimates appear high (compared with revised FY16/newly introduced FY17 EPS estimates are ~10% below current Street estimates of $4.81/5.58, respectively).

Lower fuel prices and WEX's hedge gain grow-over to drag significantly on FY16 EPS (perhaps ~$1.20 combined). However, with shares, trading at ~14.5x $5.00 in earnings for CY17E the investment is attractive.

Reduced FY16E to $4.35 (from $5.00) reflects ~9% organic growth, ~6% benefit from improved Esso profitability and Benaissance accretion, offset by the aforementioned $1.20 (~25pt headwind) combined fuel price and hedging gain headwinds. Introducing a FY17E EPS of $5.00, which implies 15% EPS growth.

Outperform rating but lower our price target to $85 (from $103).

For an analyst ratings summary and ratings history on WEX Inc. click here. For more ratings news on WEX Inc. click here.

Shares of WEX Inc. closed at $71.77 yesterday.

You May Also Be Interested In

• Boston Scientific (BSX) PT Raised to $83 at Stifel
• Compass Minerals International (CMP) PT Lowered to $15 at Deutsche Bank
• Equity Residential (EQR) PT Raised to $70 at Evercore ISI