Cunaplus_M.Faba/iStock via Getty Images
Baird analyst David Koning downgraded FleetCor Technologies (NYSE:FLT) to Neutral from Outperform on Wednesday on the view that the recent sale of its Russia business is set to be more dilutive than expected.
The fuel card and payment products company has guided for about 4% dilution from the Russia divestment, but Koning thinks its ~7% dilutive, he wrote in a note.
“Russia has averaged 9.2% of net income the past four quarters and the sale price implies they can buy back less than 2% of shares, which implies 7%+ dilution,” he explained. Also, he added, “we think Russia may have been growing faster than the fuel segment average and running at higher margins, so a sale could hurt growth and margins mildly.”
The analyst also pointed to FLT’s valuation, noting the stock outperformed the wider equity market by a wide margin year-to-date, implying limited upside from current levels.
FLT edged down 0.8% in Wednesday morning trading.