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World Fuel Services Corporation: Time To Deploy Some Capital

Jun. 05, 2020 10:09 AM ETWorld Fuel Services Corporation (INT)
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  • INT has all the hallmarks of a quality value play.
  • Downside is limited due to balance sheet strength and strong cash flows.
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World Fuel Services Corporation (NYSE:INT) acts as a middleman between the refineries and fuel customers in the land, aviation and marine industries. This stock came across our desk from a screen we ran where the objective was to find profitable dividend-paying stocks which were selling below their intrinsic values.

In investing, we get paid to predict the future. With the exception of the health and food industry to name but a few, most industries have been battening down the hatches in order to withstand the glaring drop in demand as a result of the pandemic-driven lockdowns. World Fuel Services is no different. Although the first quarter reported, for example, volume of 1.4 billion gallons in the land segment (which was a 3% increase), a significant decline is expected in the second quarter due to the prohibition of travel in the US for non-essential work in the beginning of the lockdown. Volumes in the aviation and marine segments were both down 6% over the first quarter of 12 months prior. Lower fuel prices resulted in sales dropping 8% in the first quarter to come in just over $8 billion.

On the bottom line side, net income came in at $41.6 million which was an 11% increase over the same quarter of 12 months prior. The real carnage with respect to volumes will come in the second quarter which is why management has cut or significantly reduced all discretionary spending as well as the capex budget in order to protect cash flows as much as possible. With some luck, INT will only post a light loss in the second quarter before rallying back strongly in the final two quarters of the year.

We believe it is fair to say though that the aviation sector will remain subdued in the near term at


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Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in INT over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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