Valvoline (VVV) is expected to deliver fiscal Q2 results ahead of Wall Street estimates, supported by solid same-store sales growth and pricing actions that should offset rising input costs, RBC Capital Markets said in a report Monday.
The firm expects fiscal Q2 same-store sales growth of 5.7% and adjusted earnings before interest, taxes, depreciation, and amortization of $126 million, both above consensus, citing strong demand and pricing momentum that should offset "base oil inflation," which it views as "overdone," according to the report.
Looking ahead, the company is seen as well positioned to manage inflationary pressures, with pricing expected to largely offset higher base oil costs. The firm said current guidance could prove conservative, leaving room for a potential "beat and raise" outcome that may support a positive market reaction.
Over the medium term, the company is expected to benefit from stronger growth and higher margins following the sale of its global products division, with mid-teens sales growth seen as "achievable" alongside continued unit expansion, the report said.
RBC has an outperform rating on Valvoline with a price target of $46.
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