WEX, Inc.

WEX Details

WEX Inc. (NYSE: WEX) is a company that provides financial technology services. Fleet Solutions, Travel and Corporate Solutions, and Health and Employee Benefit Solutions are the Company's three segments. The Fleet Solutions segment provides customers with payment and transaction processing services specifically designed for the needs of commercial and government fleets.

Latest News:

• Appointment of a Chief Operating Officer: Robert Deshaies has been named Chief Operating Officer (COO), Americas, as part of the reorganization, which will take effect on January 1, 2022. In this newly created post, Mr Deshaies will supervise the strategic growth and collaboration across Fleet, Health, Corporate Payments, and Travel in the Americas.

Q3FY21 Results:

• Robust Revenue Generation: Total revenue climbed by 26% to $482.8 million in Q3FY21, compared to $382.1 million in Q3FY20. The good impact of gasoline prices was $34.9 million in the quarter, while the favorable impact of foreign currency rates was $1.0 million.
• Increase in Net Income: On a GAAP basis, net income attributable to shareholders was $48.3 million, or $1.07 per diluted share, an improvement from a loss of $65.8 million, or $(1.49) per diluted share in Q3FY20. The Company's adjusted net income attributable to shareholders, a non-GAAP metric, was $111.1 million, or $2.45 per diluted share, in Q3FY21, up 54% from $70.9 million, or $1.59 per diluted share, in the same quarter last year.
• Adequate Balance Sheet: On September 30, 2021, the revolving credit facility had a borrowing capacity of $665 million along with available cash of $145 million.

Performance Metrics for Q3FY21:

• The average number of vehicles serviced in Q3FY21 was 16.2 million, up 6% over the previous quarter.
• The total number of fuel transactions handled increased by 8% YoY to 161.8 million. The number of transactions processed increased by 11% to 134.0 million.
• The Travel and Corporate Solutions segment's purchasing volume was $12.8 billion in Q3FY21 vs. $4.7 billion in the previous quarter.
• Health and Employee Benet Solutions' average number of Software-as-a-Service (SaaS) accounts in the United States was 16.9 million in Q3FY21, up from 14.6 million in the previous quarter.

Key Risks:

• Fuel Price Fluctuations: Since a large portion of WEX revenues is derived from the dollar amount of fuel purchased by or through our customers and from our fuel retailer partners, a decrease in demand for fuel and other vehicle products and services, as well as volatility in fuel prices, could have a material adverse impact on Company's revenues and financial condition.
• Stiff Competition: The payments solutions market is a cutthroat business. Such competition might have a significant negative impact on Company's fees, margins, and ability to acquire, maintain, and extend customer relationships on favorable terms.

Outlook:

• Revenue & EBITDA Estimates: The Company forecasts revenue of $468 million to $483 million in Q4FY21 and adjusted net income of $102 million to $111 million, or $2.25 to $2.45 per diluted share.

Condensed Consolidated Statement of Operations (in thousands except per share data):

• With growth rates of 26% and 54%, the Company surpassed the high end of revenue and adjusted earnings estimates.
• Significantly increased margins in the Fleet and Travel & Corporate Solutions segments, driven by strong organic growth and continuous integration of acquired businesses.
• During Q3FY21, the Company handled $26 billion in purchases, up 93% from the previous quarter.
• In Q3FY21, adjusted net income per diluted share climbed by 54% to USD 2.45, up from USD 1.59 in Q3FY20.

Valuation Methodology: Price / Earnings Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the Company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

WEX Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

Building on the strong momentum of the first half of the year, the Company's third-quarter results exceeded expectations, with revenues significantly exceeding the previous quarterly high and adjusted profitability up YoY and sequentially. Its outstanding adjusted profits results were fueled by higher-than-expected volume in the Fleet Solutions and Travel and Corporate Solutions sectors, as well as double-digit revenue growth in both. Therefore, based on the above rationale and valuation, we have given a "Buy" rating at the current price of USD 150.37 on November 12, 2021, at 10:55 AM ET.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

Technical Analysis Summary:

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