Friday - Analysts at Jefferies have increased their price target on WEX Inc. (NYSE:WEX) shares, a leading financial technology service provider, to $240 from $235, while maintaining a Hold rating on the stock. The adjustment reflects expectations for higher fuel prices to contribute to a stronger second-quarter and full-year financial outlook for the company.
The revised price target is based on the assumption of higher fuel costs, with estimates at $3.79 per gallon for the second quarter and $3.68 per gallon for the entire fiscal year. These projections have led Jefferies to anticipate WEX's second-quarter revenue to be approximately 2.5% above the consensus of Wall Street analysts, and full-year revenue to be 1.5% higher.
Despite the positive adjustment, Jefferies suggests that the recent strong performance of WEX's stock may already account for the expected increase in guidance. The firm points out that additional stock re-rating might be limited due to several factors.
One of the main concerns is the challenge WEX faces in achieving a 6% year-over-year organic growth rate, excluding fuel, within its Mobility segment. This would require gallon volume growth to accelerate to roughly 9% by the fourth quarter, compared to nearly flat growth in the first quarter.
Additionally, Jefferies indicates potential headwinds for WEX's Corporate Payments and Health divisions. The Corporate Payments segment may face a slowdown in travel, while the Health segment could see subdued account growth.
These factors contribute to the view that there is limited upside potential for WEX's stock beyond the current price level, despite the positive impact of higher fuel prices on the company's financial outlook.
InvestingPro Insights
As WEX Inc. navigates the financial landscape, real-time data from InvestingPro offers a deeper dive into the company's performance. With a market capitalization of $10.02 billion and a price-to-earnings (P/E) ratio standing at 38.57, WEX reflects a significant valuation in the market. The adjusted P/E ratio for the last twelve months as of Q4 2023 is slightly lower at 30.53, suggesting a more nuanced investor perspective when considering the company's earnings potential.
InvestingPro Tips highlight that WEX is anticipated to be profitable this year, with net income expected to grow. This aligns with the positive outlook from Jefferies regarding the impact of higher fuel prices on the company's financials. On the flip side, it's important to note that 10 analysts have revised their earnings expectations downwards for the upcoming period, which could signal caution. Additionally, WEX's stock has been trading near its 52-week high, with a price 98.43% of this peak, and has experienced a robust return of 21.31% over the last three months.
For readers looking to delve into more comprehensive analysis, there are additional InvestingPro Tips available that could further inform investment decisions. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription and gain access to these insights.
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