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 core product is a special purpose business charge card for the commercial fuel industry. About 90 percent 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 Norcross, Georgia, FleetCor has a market capitalization of $4.7 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; increasingly, managers opt for the Internet.

FleetCor also is moving 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.

FleetCor in March completed its acquisition of Telenav Mobile, a developer of personalized navigation devices based in Sunnyvale, Calif.

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, 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, as overall economic activity improves in key markets such as North America.

The trucking industry is a leading indicator for the overall economy. During the initial stages of an economic recovery, customers start to ship more goods in expectation of stronger business conditions.

The latest US Freight Transportation Forecast, compiled by the American Trucking Association (ATA), predicts significant growth in the trucking industry by 2022.

In 2010, the trucking sector accounted for 81 percent of the total revenue and 67 percent of tonnage for all types of transportation companies.

The ATA’s forecast predicts that total revenue for the trucking industry will rise nearly 66 percent and tonnage will increase 24 percent by 2022.

FleetCor’s stock price has occupied the fast lane over the past several months, as economic activity picks up speed (see graph below).



Despite its recent run-up, the stock still enjoys considerable room for growth. This month, FleetCor released a stellar earnings report for the first quarter of 2013, ended March 31.

First-quarter revenue jumped 32 percent to $193.7 million, compared to $146.2 million in the same quarter a year ago. Earnings increased 54 percent to $64.7 million, or $0.77 in earnings per share (EPS), compared to $42.1 million, or $0.49 in EPS in the year-ago quarter. These results marked the strongest earnings growth for the company in nine quarters.

Much of the earnings growth stemmed from dramatically higher revenue per fill-up, as well as from growth among three overseas acquisitions that were closed in recent months: General Electric’s (NYSE: GE) Australia-based fuel card business, Cardlink in New Zealand, and Telenav Mobile in the US.

FleetCor’s acquisition of GE’s fleet card business in Australia, combined with that of Cardlink in New Zealand, gives 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.

GE’s “Fleet Card” is a multi-branded card accepted by more than 6,000 fuel outlets and over 7,000 automotive service and repair centers across Australia.

FleetCor’s latest acquisitions are part of the company’s plan to target 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.

In 2011, about one-third of the company’s revenue was generated outside of the US. By the end of 2012, that number was roughly 40 percent.

FleetCor raised full-year 2013 EPS guidance to $3.70 to $3.80; Wall Street’s consensus calls for $3.67. The company expects full-year revenue of $810 million to $820 million, compared to the consensus forecast of $812.6 million.

With a 12-month trailing price-to-earnings (P/E) ratio of 29.3, FleetCor is reasonably priced compared to its growth prospects and the trailing P/E of 31 for its sector of business services.

John Persinos is managing director of Personal Finance and its parent web site, Investing Daily.