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Valvoline Inc (VVV)
NYSE:VVV
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Valvoline
(NYSE:VVV)
69Neutral
Positive Factors
Acquisition Benefits
Breeze Autocare is seen as a fairly priced acquisition that accelerates network growth for Valvoline's core business, which is normalizing from its high-growth phase.
Financial Performance
Shares of Valvoline (VVV) are recovering nicely following a solid fiscal Q1 print, highlighted by system-wide comps of +8.0%.
Operational Efficiency
Q1 gross margins stepped up +80 bps year-over-year to 36.9% as operating efficiencies flowed through from the higher top-line.
Negative Factors
Acquisition Concerns
The timing of Valvoline's acquisition of Breeze Autocare is questioned due to market concerns over the company's long-term earnings outlook and other ongoing internal initiatives that could strain resources.
Guidance Disappointment
Valvoline came under heavy pressure on weaker FY25E guidance.
Revenue Impact
Re-franchising transactions will reduce FY25E EBITDA by about $24M and revenues by around $100M.
Valvoline (VVV) vs. S&P 500 (SPY)
Market Cap
$4.56B
Dividend YieldN/A
Average Volume (3M)1.68M
Price to Earnings (P/E)17.4
Beta (1Y)0.99
Revenue Growth11.85%
EPS GrowthN/A
CountryUS
Employees11,500
SectorEnergy
Sector Strength86
IndustryFossil Fuels
Share Statistics
EPS (TTM)2.08
Shares Outstanding127,100,500
10 Day Avg. Volume1,540,173
30 Day Avg. Volume1,677,131
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)2.78
Price to Cash Flow (P/CF)28.00
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$41.43Price Target Upside17.23% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering7
Valvoline Business Overview & Revenue Model
Company DescriptionValvoline Inc. (VVV) is a leading global marketer and supplier of premium branded lubricants and automotive services. The company operates in the automotive services sector, focusing on quick-lube services and manufacturing lubricants for a variety of vehicles and engines. Valvoline is renowned for its high-quality motor oils, antifreeze products, and transmission fluids, serving both the commercial and consumer markets.
How the Company Makes MoneyValvoline makes money primarily through two key revenue streams: product sales and services. The product sales segment includes the manufacturing and distribution of high-performance lubricants and automotive chemicals under the Valvoline brand, which are sold to consumers, auto parts retailers, and professional installers. The services segment generates revenue through the operation of company-owned and franchised quick-lube centers under the Valvoline Instant Oil Change brand. These centers offer a comprehensive suite of preventive maintenance services, including oil changes, tire rotations, and fluid exchanges. Significant partnerships with automotive retailers and distributors, as well as a strong franchise network, contribute to Valvoline's earnings by expanding its market presence and customer reach.
Valvoline Financial Statement Overview
Summary
Valvoline's financial health is strong in revenue growth and profitability, yet the high leverage and relatively low free cash flow pose risks. While the company effectively utilizes equity, it should manage debt levels to ensure balanced growth and stability.Income Statement
Valvoline shows a strong revenue growth trajectory with an increase from $1.44 billion in 2023 to $1.66 billion in TTM (Trailing-Twelve-Months). Gross profit margin is healthy at 38.36%, and net profit margin at 13.73% indicates solid profitability. However, the recent decline in EBITDA margin to 32.05% from 22.67% is concerning and needs monitoring.75
Positive
Balance Sheet
The balance sheet reveals a high debt-to-equity ratio of 5.68, which poses a risk. Return on equity is robust at 99.15%, showcasing effective use of equity. The equity ratio of 9.78% indicates a heavy reliance on liabilities, which may affect long-term financial stability.60
Neutral
Cash Flow
Operating cash flow to net income ratio of 1.26 indicates efficient cash generation relative to net income. However, free cash flow growth is modest, with a recent figure of $50.7 million. The free cash flow to net income ratio at 0.22 suggests limited cash available after capital expenditures.68
Positive
| Breakdown | |||||
| TTM | Sep 2024 | Sep 2023 | Sep 2022 | Sep 2021 | Sep 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 1.66B | 1.62B | 1.44B | 1.24B | 1.04B | 727.00M | Gross Profit |
| 636.90M | 618.80M | 544.50M | 476.40M | 432.30M | 301.00M | EBIT |
| 448.20M | 367.20M | 247.20M | 220.30M | 240.10M | 160.20M | EBITDA |
| 532.00M | 367.20M | 363.60M | 284.70M | 430.40M | 591.00M | Net Income Common Stockholders |
| 227.80M | 211.50M | 1.42B | 424.30M | 420.30M | 316.60M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 60.00M | 68.30M | 756.60M | 23.40M | 122.60M | 760.00M | Total Assets |
| 2.35B | 2.44B | 2.89B | 3.42B | 3.19B | 3.05B | Total Debt |
| 1.31B | 1.37B | 1.83B | 1.92B | 1.86B | 2.19B | Net Debt |
| 1.25B | 1.31B | 1.42B | 1.89B | 1.74B | 1.43B | Total Liabilities |
| 2.12B | 2.25B | 2.69B | 3.11B | 3.06B | 3.13B | Stockholders Equity |
| 229.80M | 185.60M | 203.20M | 306.60M | 134.50M | -76.00M |
| Cash Flow | Free Cash Flow | ||||
| 50.70M | 40.70M | -221.30M | 152.20M | 300.80M | 277.70M | Operating Cash Flow |
| 286.40M | 265.10M | -40.80M | 284.20M | 403.90M | 371.70M | Investing Cash Flow |
| 28.50M | 136.80M | 2.04B | -207.60M | -399.90M | -222.60M | Financing Cash Flow |
| -674.30M | -746.30M | -1.67B | -218.90M | -535.50M | 450.30M |
Valvoline Technical Analysis
Negative
35.34
Price Trends
36.74
Negative
37.97
Negative
40.05
Negative
Market Momentum
-0.45
Negative
43.75
Neutral
72.31
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For VVV, the sentiment is Negative. The current price of 35.34 is below the 20-day moving average (MA) of 35.76, below the 50-day MA of 36.74, and below the 200-day MA of 40.05, indicating a bearish trend. The MACD of -0.45 indicates Negative momentum. The RSI at 43.75 is Neutral, neither overbought nor oversold. The STOCH value of 72.31 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for VVV.
Valvoline Peers Comparison
Overall Rating
UnderperformOutperform
Sector (57)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
77 Outperform | $14.66B | 22.52 | 25.61% | 1.70% | 0.12% | 24.30% | |
69 Neutral | $4.56B | 17.40 | 186.35% | ― | 11.85% | ― | |
65 Neutral | $25.78B | 19.04 | 19.13% | 2.42% | -4.59% | 11.09% | |
60 Neutral | $2.95B | 23.67 | 7.27% | 1.63% | 1.65% | -10.99% | |
57 Neutral | $8.73B | 5.56 | -5.96% | 7.15% | -0.09% | -73.96% | |
57 Neutral | $2.64B | 21.03 | 0.18% | 2.90% | -4.35% | -115.63% | |
55 Neutral | $2.14B | 305.60 | 0.90% | 9.17% | -17.69% | -99.09% |
* Energy Sector Average
Performance Comparison
VVV
Valvoline
35.34
-8.64
-19.65%
ASH
Ashland
56.45
-37.33
-39.81%
CVI
CVR Energy
21.20
-13.67
-39.20%
FUL
H.B. Fuller Company
53.57
-25.28
-32.06%
PPG
PPG Industries
110.73
-27.38
-19.82%
RPM
RPM International
114.27
-1.75
-1.51%
Valvoline Earnings Call Summary
Earnings Call Date: Feb 6, 2025 | % Change Since: -4.07% | Next Earnings Date: May 7, 2025
Earnings Call Sentiment Positive
The earnings call for Valvoline Inc. highlighted strong growth in sales and EBITDA, successful refranchising efforts, and recognition in the industry. However, there are concerns regarding SG&A increases, the impact of refranchising on future earnings, and potential cost pressures. Despite these lowlights, the overall performance indicates a positive start to the fiscal year.Highlights
System-Wide Store Sales Growth
System-wide store sales grew 14% to $820 million, with same-store sales growth of 8%.
Net Sales and Adjusted EBITDA Increase
Net sales increased 11% to $414 million, and adjusted EBITDA grew 14% to $103 million.
New Store Additions
35 net new stores were added across the network this quarter.
Refranchising Efforts
Successfully closed refranchising efforts in Central and West Texas, transferring 39 stores to a new franchise partner.
Recognition and Awards
Valvoline Inc. was recognized as the leading automotive services retailer and number 24 overall on the Entrepreneur Franchise 500 list for 2025.
Strong Cash Flow and Share Repurchase
Cash flows from operating activities increased by $20 million over the prior year, and share repurchases totaled $39 million for the quarter.
Lowlights
SG&A Increase
SG&A as a percentage of sales increased by 40 basis points to 19.6%, driven by technology investments.
Impact of Refranchising on Future Earnings
Refranchising transactions are expected to have a larger impact on earnings for the remainder of the year.
Leap Day Impact
Leap Day is expected to have a 120 basis point negative impact on the same-store sales comp for Q2.
Potential Future Cost Pressures
Concerns about potential future impacts from rising oil prices and waste oil recovery cost adjustments.
Company Guidance
During Valvoline Inc.'s first quarter of fiscal 2025 earnings call, the company reported a 14% increase in system-wide store sales to $820 million and an 8% growth in same-store sales. Net sales rose by 11% to $414 million, while adjusted EBITDA saw a 14% increase to $103 million. The quarter also saw the addition of 35 net new stores and the completion of a refranchising effort involving 39 stores in Central and West Texas. The company emphasized strategic priorities, including driving full potential in existing business, accelerating network growth, and targeting customer and service expansion. Valvoline also highlighted improvements in non-oil change revenue and employee retention, with a focus on enhancing customer experience and employee engagement. Looking ahead, the company reiterated its full-year guidance with expectations for a 5% to 7% increase in same-store sales, 160 to 185 net store additions, and adjusted EBITDA between $450 million and $470 million.Valvoline Corporate Events
M&A TransactionsBusiness Operations and Strategy
Valvoline Expands Market with Acquisition of Breeze Autocare
Positive
Feb 20, 2025
On February 17, 2025, Valvoline Inc. announced its agreement to acquire OC IntermediateCo, which owns Breeze Autocare, a business with nearly 200 quick lube oil change stores under the Oil Changers brand, for approximately $625 million. This acquisition is expected to significantly expand Valvoline’s market presence, bringing its total number of locations to over 2,200, and is projected to close in fiscal Q3 2025, pending customary closing conditions and regulatory approvals. The deal aims to accelerate Valvoline’s growth and enhance its cash flow profile, leveraging Breeze Autocare’s strong track record and geographic reach.
Business Operations and StrategyFinancial Disclosures
Valvoline Reports Strong Q1 2024 Financial Performance
Positive
Feb 6, 2025
Valvoline reported robust financial results for the first quarter ended December 31, 2024, with an 11% increase in sales and substantial growth in system-wide store sales. The company also added 35 stores during the quarter and completed a significant refranchising transaction, which contributed to a 177% increase in income from continuing operations. Valvoline’s strategy includes expanding its store network, aiming for over 3,500 locations, and leveraging its business model to sustain profit growth, thereby enhancing its market position.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.