On Thursday, BMO (TSX:BMO) Capital Markets adjusted its price target for Corpay (NYSE:CPAY) shares, a global payment processing company, to $350 from the previous $360 while maintaining its Outperform rating.
The revision follows Corpay's first-quarter results, which met expectations, but the company provided a 2024 guidance that was slightly below what was anticipated. This guidance adjustment is attributed to the impact of foreign exchange and interest rate headwinds as well as a softer performance in the Lodging sector.
BMO Capital has also slightly lowered its earnings per share (EPS) estimates for Corpay by 2-3%. Despite the near-term challenges expected to continue into the second quarter of 2024, BMO Capital anticipates Corpay to improve its growth trajectory towards the end of the year.
The firm predicts higher single-digit organic growth for Corpay's Vehicle Payments in the second half of 2024 and foresees benefits from significantly easier comparisons in the Lodging sector for each quarter.
Corpay has also committed to focusing on mergers and acquisitions that are accretive to earnings, rather than deals that simply add capabilities. This strategic shift is expected to contribute to the company's stronger performance in the latter part of the year.
The company's commitment to strategic and accretive mergers and acquisitions is a key factor in BMO Capital's continued positive outlook on Corpay's stock, despite the reduced price target. BMO's analysis suggests that while Corpay may experience some short-term headwinds, its long-term growth potential remains intact.
InvestingPro Insights
As Corpay (NYSE:CPAY) navigates through its current challenges, real-time data from InvestingPro provides a broader perspective on the company's financial health and market position. With a market capitalization of $20.86 billion, Corpay is trading at a P/E ratio of 22.65, which reflects a premium relative to near-term earnings growth. The company's Price / Book ratio stands at 6.45, indicating a high valuation compared to its book value as of the last twelve months leading up to Q1 2024.
InvestingPro Tips also shed light on the company's performance and outlook. Analysts have recently revised their earnings downwards for the upcoming period, which aligns with the cautious guidance provided by Corpay. Despite this, Corpay has been profitable over the last twelve months, and analysts predict it will maintain profitability this year. Notably, the stock has seen a significant price uptick of 33.11% over the last six months, signaling strong investor confidence. However, it's worth noting that Corpay does not pay a dividend, which may influence investment decisions for income-focused shareholders.
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