FleetCor: King of the Road

“You know that log book, she’s way behind.”
— Hank Williams Sr., “Lowdown Truck Driver”

Forget the cherished myths promulgated by country and western songs. There’s little freedom of the road for truck drivers these days.

Drivers with commercial trucking fleets spend their time behind the wheel under strict management from corporate headquarters, with almost every movement planned and monitored to make that trip as cost-effective as possible.

A crucial logistical tool is the fleet card, sometimes called a fuel card, used to pay for gasoline, diesel, and other fuels at gas stations. Fleet cards also are used to pay for vehicle maintenance and expenses.

This transportation trend is a long-term boon for FleetCor Technologies (NYSE: FLT), the world’s leading provider of fleet cards and related payment processes for companies and government entities in 21 countries throughout North America, Latin America, Europe, and Australasia.

FleetCor’s flagship product is a special purpose business charge card for the commercial fuel industry. About 90% of the company’s revenue derives from the sale of these cards.

Fleet cards eliminate the need for cash carrying, increasing the safety of drivers. The elimination of cash also helps prevent fraudulent transactions at a fleet owner or manager’s expense.

Headquartered in Atlanta, Georgia, FleetCor has a market capitalization of $19.9 billion and is the dominant firm in its field. In addition to fleet cards, the company sells a wide variety of customized fleet and lodging payment programs, as well as cards to buy fuel and lodging at participating locations.

FleetCor has forged partnerships with more than 800 clients, ranging in size from major energy companies to small petroleum marketers. Among its biggest partners are ExxonMobil (NYSE: XOM), Chevron (NYSE: CVX), and BP (NYSE: BP).

The company also provides equipment that prevents unauthorized transactions involving sea-going vessels, locomotives, and mining and agricultural machinery.

Big Brother of the Big Rigs

Fleet cards enable managers to choose only the data they need and get it delivered to them quickly in any medium, typically the Internet.

FleetCor also moved into the GPS monitoring of mobile workers, a practice that perhaps irks those under surveillance (as well as civil libertarians), but provides huge efficiencies for clients. When integrated with fleet cards, these devices track virtually every movement of drivers and other personnel—anytime, anywhere—to curtail fraud, unauthorized activity and theft.

FleetCor’s largest direct competitor, Maine-based WEX (NYSE: WEX), formerly known as Wright Express Corp, is a formidable rival but so far doesn’t match FleetCor’s aggressive expansion into new tracking technologies, which promise enormous future growth.

Tracking and analytical tools for card users are becoming more powerful and flexible, as risk management and cyber fraud detection move to the forefront of concerns for the trucking industry.

Fleet cards allow fleet owners/managers to receive 24/7, real-time reports and establish purchase controls, allowing comprehensive management of all business related expenses.

Managers can request fleet card billing systems that generate highly detailed fuel receipts for drivers that specify filling station name city and state; truck number, license and mileage; driver’s license number; price per gallon and number of gallons bought; and time and date. FleetCor is in the best position to benefit from this growing use of mobile payments and highly granular monitoring.

Leading Indicator

FleetCor also will benefit from the trucking industry’s resurgence this year and into 2022, as overall economic activity improves in key markets such as North America. Supply chain disruptions caused by the coronavirus pandemic are lifting the fortunes of the transportation sector, as companies scramble to move goods through bottlenecks.

Read This Story: Supply Bottlenecks Help Some, Hurt Others

Once COVID fades, economic growth will continue boosting the transportation sector. The trucking industry is a leading indicator for the overall economy. As economic growth accelerates, customers start to ship more goods in expectation of stronger business conditions.

Trucks move roughly 72.5% of the nation’s freight by weight. The trade group American Trucking Associations (ATA) predicts that trucking volumes will rebound, rising 4.9% next year and then growing 3.2% per year on average through 2026. Overall freight revenues in 2020 totaled $879 billion, a number that’s expected to reach $1.435 trillion in 2031. Freight rates are picking up as well (see chart).

FleetCor’s recent acquisitions of fleet card companies in Australia and New Zealand give FleetCor a foothold in the booming Asia-Pacific region where the construction and efficient use of land-based infrastructure for commercial shipping is increasingly important.

FleetCor is targeting emerging markets in Asia where trucking fleets are expanding exponentially but payment options remain relatively primitive. Australia and New Zealand will serve as “jumping off” points to other promising markets in the Pacific Rim.

FleetCor’s foray into emerging markets sets it apart from its rivals and provides it with enormous growth potential over the long haul.

FleetCor also is developing new technologies to take advantage of the coming boom in self-driving trucks that are enabled with artificial intelligence.

This week, the company released a stellar earnings report for the latest quarter.

FleetCor on Wednesday reported third-quarter 2021 adjusted earnings per share (EPS) of $3.52, beating expectations of $3.49. This compared to EPS of $2.80 a year ago.

The company posted revenue of $755.5 million in Q3, surpassing consensus forecasts of $738.6 million. FleetCor expects full-year EPS in the range of $13 to $13.10, with revenue in the range of $2.79 billion to $2.81 billion.

FleetCor’s stock currently hovers at about $241. The average analyst expectation is for the share price to reach $314 in 12 months, for an implied gain of more than 30%. And yet, the stock’s 12-month forward price-to-earnings ratio is only 16.5. Hitch a ride with FleetCor, for both value and growth.

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John Persinos is the editorial director of Investing Daily. Subscribe to his video channel.