World Fuel Resumes Acquisition Game With Aviation Segment

World Fuel Services Corporation (NYSE:INT) recently announced plans to buy Universal Weather and Aviation’s UVair fuel business.

The deal, worth $170 million (part of which will be paid over three years), will be financed through cash-on-hand and liquidity via the company’s existing unsecured credit facility. Recently, World Fuel’s credit facility has been raised to $1.8 billion. In addition, the company has $218 million cash on hand which makes it easier for it to finance the deal. World Fuel Services expects the transaction to be accretive by 14-17 cents in terms of GAAP earnings per share (EPS) and 16-19 cents to non-GAAP EPS in the first year.

After a three-year hiatus, the acquisition game is back on for World Fuel Services, now in the aviation segment. The aviation segment plays a vital role in the growth of the company and is considered to be the best performer. It contributes 50% of operating profit.

UVair, the fueling segment of the Universal Weather and Aviation is headquartered in Houston, Texas. This division is a large-scale supplier of fuel at over 5,000 locations all over the world. It provides fuel to business and general aviation customers, a majority of which is supplied to the U.S.

As both the companies are core fuel suppliers, the UVair acquisition will complement World Fuel Services’ aviation business and in fact will have a few customers in common. World Fuel Services’ agreement to buy the UVair fuel division from Universal comprises a pact that requires the latter to work closely with the Miami-based logistics company for supplying fuel to their common customers. Being in the same business at some of the common airports with World Fuel, their collaboration is anticipated to be less risky with higher chances of outperformance.

Commenting on this deal, the chairman and CEO of World Fuel stated that the acquisition will enhance its potential in the aviation fuel division and will boost its business globally. The transaction is expected to close by the end of 2019 and is dependent on pending approvals.

Zacks Rank & Other Key Picks

World Fuel Services carries a Zacks Rank #2 (Buy). Other top-ranked players in the energy space include Enbridge Inc. (NYSE:ENB) , Dril-Quip, Inc. (NYSE:DRQ) and BP (LON:BP) Midstream Partners (NYSE:BPMP) , each holding a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Enbridge’s earnings beat the Zacks Consensus Estimate in three of the last four quarters.

Dril-Quip’s earnings beat the Zacks Consensus Estimate in three of the previous four quarters.

BP’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters.

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