Bear Of The Day: World Fuel Services

Headquartered in Miami, Florida, World Fuel Services (INT – Snapshot Report) provides downstream marketing and financing of aviation, marine and land fuel products and related services. They deliver fuel solutions and logistics at more than 8,000 locations around the world. The company operates through three segments—Aviation, Marine and Land.
 
Disappointing Results and Outlook

The company reported second quarter results on August 3. Consolidated revenue for the quarter was $8.5 billion down 25% year-over-year, with Aviation segment revenue down 28%, Marine segment revenue down 21%, and Land segment revenue down 26%.  All of these year-over-year declines were due to lower oil prices, partly offset by increased volumes.

Operating earnings for the quarter came in at $0.49 per share, significantly below the Zacks Consensus Estimate of $0.72 per share. Per management, results were significantly impacted by seasonality in Watson Fuels and low prices coupled with reduced volatility in Marine.

The management said that conditions in overall marine marketplace remain quite poor, specifically in the offshore, dry bulk and container markets. They added that the fuel market remains oversupplied, with weak demand and record high inventory levels.

Downward Revisions

Due to poor results and weak outlook, analysts have revised their estimates for the company sharply downwards. Zacks Consensus Estimates for the current and the next fiscal year are now $2.67 per share and $3.10 per share respectively, down sharply from $3.32 per share and $3.60 per share, before the results. Falling estimates sent the stock to a Zacks Rank #5 (Strong Sell).
 
The Bottom Line

Downturn in energy prices has badly impacted all companies in the fuel supply industry. While this company is financially stronger than many other players in the business, it is safer to avoid the stock for the time being in view of the cloudy outlook for the market. Further, looking at the entire spectrum of energy players, companies with significant downstream operations are likely to see more pain in the coming months.