Valvoline (VVV) was able to recover deferred volume due to winter storm Fern by late February based on transaction data, RBC Capital Markets said in a research note Monday.
The brokerage said it now expects fiscal Q2 same-store sales growth of 5.7%, up from 5.2% previously, and adjusted earnings before interest, taxes, depreciation and amortization of $126 million, compared with $125 million prior estimate, both above consensus.
The winter storm's impact is one of three factors, along with rising oil prices and sale of Jiffy Lube, that RBC cited as reasons for Valvoline shares trading about 14% off highs, although analysts said these are "overblown."
Rising oil prices is a net negative for the company, but Valvoline has two natural hedges in its process that mitigate the impact, the brokerage said. In addition, the proposed $1.3 billion sale of Jiffy Lube to private equity firm Monomy Capital Partners is unlikely to impact the company for at least 12 months and could actually be a tailwind near-term if store closures and operational changes are implemented.
RBC has an outperform rating on Valvoline and a $46 price target.
Price: 33.47, Change: +0.05, Percent Change: +0.15
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