Stocks’ Details
 

Marathon Petroleum Corporation

 
MPC Helps Hospitals with Respiratory Masks: Marathon Petroleum Corporation (NYSE: MPC) is one of the top integrated, downstream energy company, which is engaged in operating via branded locations within the US, including Marathon brand retail outlets. On 7 April 2020, the company responded to the COVID-19 pandemic by providing more than 575,000 N95 respiratory masks to hospitals and healthcare organizations in 20 states. Further, it also contributed $1 million to the American Red Cross through Marathon Petroleum Foundation, Inc. The move is a part of the company’s effort to help protect healthcare providers as they treat patients infected with COVID-19.
 
FY19 Financial Highlights for the Period ended 31 December 2019: MPC declared its full-year results, wherein the company reported total revenue and other income of $124,880 million, up from $97,102 million in FY18, owing to higher sales volume from Refining & Marketing segment (31% of total revenues) refined product on account of Andeavor acquisition. The company reported income from operations of $5,576 million, up slightly from $5,571 million reported in FY18. In FY19, the company’s Pipeline throughputs stood at 5,245 million barrels per day (mbpd), up from 4,177 mbpd in FY18. In FY19, the company declared a dividend of $2.12 per share, up from $1.84 per share in FY18.
 

Segmental Highlights (Source: Company Reports)
 
Outlook: For Q1FY20, MPC anticipates cost per barrel from refining and marketing segment to be ~$6.05, while distribution cost is estimated at ~$1,300 million. Depreciation and amortization expenses for the segment are projected at $440 million. The company is now set to report its 1QFY20 results on 5 May 2020.
 
Valuation Methodology: EV/Sales Multiple Based Relative Valuation
 

EV/Sales Based Relative Valuation (Source: Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of MPC closed at $23.98 with a market capitalization of ~$15.6 billion. The stock made a 52-week low and high of $15.26 and $69.65 and is currently trading at the lower band of the range. The stock has corrected 58.75% and 60.39% in the last three months and one year, respectively. Considering the aforesaid facts, current trading levels and business prospects, we have valued the stock using EV/Sales based illustrative relative valuation method. For the purpose, we have considered peers like Valero Energy Corp (NYSE: VLO), HollyFrontier Corp (NYSE: HFC), and PBF Energy Inc (NYSE: PBF), and arrived at a target price with a lower double-digit upside (in % terms).Hence, we give a ‘Buy’ recommendation on the stock at the closing price of $23.98, down 8.82% as on 15 April 2020.
 

Lyft, Inc.

 
LYFT’s Initiatives to Fight Against COVID-19 Pandemic: Lyft, Inc. (NASDAQ: LYFT) is one of the largest and fastest-growing transportation networks in the US and Canada. Recently, the company stated that it is providing free rides to families and children, low-income seniors, and doctors and nurses who need transportation to work, amid the rise of coronavirus pandemic. In doing so the company partnered with Mastercard to offer even greater access to essential rides for individuals with Down syndrome.  In another update, the company stated that it has signed a multi-year deal with Logisticare Solutions, which coordinates non-emergency medical transportation across the country.
 
LYFT Enters into Strategic Deal With Amazon: Recently, Lyft entered into a partnership with Amazon. As per the deal, Lyft has requested its delivery drivers to find job opportunities at Amazon as means of extra income, to offer necessary products amid the rising spread of coronavirus.
 
4QFY19 Key Highlights for the Period Ended 31 December 2019: During the period, LYFT reported revenue of $1,017.1 million, up from $669.5 million reported in the year-ago quarter. Adjusted net loss stood at $121.4 million as compared to a net loss of $238.5 million in Q4FY18. The quarter witnessed an 80% year over year growth in Contribution, which came in at $549.5 million. Active riders during the quarter stood at 22,905 million, up 23% year over year, whereas revenues per active rider came in at $44.4, up 23% on pcp.
 

Revenues Highlight (Source: Company Reports)
 
Outlook: For FY20, LYFT expects revenue to be in the range of $4,575 million - $4,650 million. Annual revenue growth rate is likely to be between 27% - 29%, with adjusted EBITDA loss to be between $450 million - $490 million.
 
Valuation Methodology: EV/Sales Multiple Based Valuation

EV/Sales Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of LYFT closed at $28.39 with a market capitalization of ~$8.7 billion. The stock made a 52-week low and high of $14.56 and $68.33 and is currently trading at the lower band of the range. The stock witnessed a sharp correction amid the ongoing panic related to coronavirus and fell 36.03% and 49.08% in the three months and six months, respectively. Considering the operational excellence, focused execution, and outlook, we have valued the company using EV/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of lower double-digit (in % terms). Hence, we give a “Buy” recommendation on the stock at the current market price of $28.39, down 6.92% as on 15 April 2020.
 

WEX Inc.

 
WEX Updates 1QFY20 Outlook Amid COVID-19 Crisis: WEX Inc. (NYSE: WEX) is engaged in providing payment processing and business solutions across a wide range of sectors, which incorporates fleet, travel and healthcare. Recently, the company provided an update on its 1QFY20 revenue outlook, amid coronavirus spread. In doing so, the company now expects 1QFY20 revenue to grow~2% - 3% lower than the prior revenue guidance of $445-$455 million, due to the COVID-19 impact on the Travel business and minor impact on the Over-the-Road business.
 
4QFY19 Financial Highlights for the Period ended 31 December 2019: During the quarter, WEX reported revenue of ~$440 million, up 15% on year over year basis, owing to growth across all the three segments. Fourth quarter revenues include a negative impact of $8.7 million from currency exchange rates and lower average fuel prices. In 4QFY19, average number of vehicles serviced came in at ~14.9 million, up 19% year over year.
 

 Key Highlights (Source: Company Reports)
 
Outlook for FY20: The company expects FY20 revenues in the range of $1.86 - $1.9 billion, whereas adjusted earnings are expected in the range of $10.15-$10.55 per share.
 
Valuation Methodology: P/E Multiple Based Relative Valuation
 

P/E Based Relative valuation (Source: Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of WEX closed at $108.74 with a market capitalization of ~$4.71 billion. The stock is currently trading at the lower band of its 52-week trading low and high of $71.12 and $236.52, respectively. The stock has corrected 50.79% and 46.53% in the last three months and one year, respectively. Considering the aforesaid facts, current trading levels and business prospects, we have valued the stock using P/E multiple based illustrative relative valuation method. For this purpose, we have considered peers like American Express Co (NYSE: AXP), Fleetcor Technologies Inc. (NYSE: FLT), and Global Payments Inc (NYSE: GPN), and arrived at a target price with a lower double-digit upside (in % terms).Hence, we give a ‘Hold’ recommendation on the stock at the closing price of $108.74, down 3.33% as on 15 April 2020.
 

Heico Corporation

 
COVID-19 Update: Heico Corporation (NYSE: HEI) is one of the largest manufacturers of jet engine and aircraft component replacement parts approved by the Federal Aviation Administration (“FAA”). On 16 April 2020, the company provided an update on its views of the COVID-19 crisis. In doing so, HEI stated that it is laying off few employees, momentary reducing work hours and enabling temporary pay reductions due to decline in commercial air travel amid COVID-19 impact. Further, the company is also withdrawing its FY20 outlook, due to the current uncertainty around the world.
 
1QFY20 Key Highlights for the Period Ended 31 January 2019: During the period, HEI reported revenue of $506.3 million, up from $466.1 million reported in the year-ago quarter. The increase was due to HEI’s organic net sales growth within Flight Support Group and Electronic Technologies Group segment. Net income went up 54% year over year and came in at $121.9 million. Operating income stood at $111 million, up 13% year over year. The company's operating margin improved from 21% in 1QFY19 to 21.9% in the 1QFY20. The company reported EBITDA at $132.8 million, up 13% year over year. As of January 31, 2020, cash and cash equivalents stood ~$64 million, with long-term debt (net of current maturities) of ~$567.9 million. Cashflow from operating activities stood at $81.1 million.
 

Key Highlights (Source: Company Reports)
 
FY20 Outlook: The company now anticipates net income to increase in the range of 14-15%, higher than the earlier range of 13-14%. The company continues to expect net sales to grow in the range of 6-8% over FY19 levels. The company also anticipates operating margin to be in the ambit of 21.5- 22.0%.
 
Valuation Methodology:EV/EBITDA Multiple Based Relative Valuation
 

 
EV/EBITDA Based Relative valuation (Source: Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of HEI closed at $79.17 with a market capitalization of ~$10.7 billion. The stock is currently trading at the lower band of its 52-week trading low and high of $52.01 and $147.93, respectively. The stock has corrected 34.88% and 20.77% in the last three months and one year, respectively. The company remains on focus to broaden the product offerings, services and technologies, which, in turn, will expand its customer base and geographic presence. Considering the aforesaid facts, current trading levels and business prospects, we have valued the stock using EV/EBITDA multiple based illustrative relative valuation method. For this purpose, we have considered peers like Boeing Co (NYSE: BA), Raytheon Technologies Corp (NYSE: RTX), and AAR Corp (NYSE: AIR), etc., and arrived at a target price with a lower double-digit upside (in % terms). Hence, we give a ‘Buy’ recommendation on the stock at the closing price of $79.17, up 1.41% as on 15 April 2020. 
 
 
Comparative Price Chart (Source: Thomson Reuters)

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