Morgan Stanley Raises Price Target On FleetCor Technologies

Morgan Stanley raised its price target on FleetCor Technologies, Inc. FLT Wednesday from $147 to $153 and maintained an Overweight rating.

Analysts led by Smittipon Srethapramote noted that “Unlike most of FLT's 60+ prior acquisitions, Comdata has continued to pleasantly surprise FLT management even months after the deal announcement. On the cost side, there are near-term synergy opportunities in G&A (redundancies and vendor consolidation) as well as opportunities over the next 2+ years in IT (offshoring and potential platform consolidation).”

“LT Comdata EBITDA margins should be in the 50s-60s percent. But most of the upside surprise is coming from potential revenue synergies, as management notes Comdata has not updated pricing or products in years, and that sales has seen significant underinvestment. FLT has given guidance of getting to 10 percent Comdata revenue growth, but expects it could ideally get Comdata to 20 percent by pulling the right levers,” according to Srethapramote.

The analyst report concluded by maintaining the “$7.57 2016e Cash EPS estimates, as we expect continued deterioration in fuel prices will likely be offset by realization of Comdata synergies (which, management has not yet quantified).

“We raise our base case P/E target multiple from 19x to 20x as we are increasingly confident in FLT's LT opportunity in Europe if it can successfully roll out a universal product.”

FleetCor Technologies, Inc. recently traded at $155.92, up 0.82 percent.