Benzinga | Oct 13, 2021 01:38PM EDT

Higher Fuel Prices Benefit Wex, BofA Says In Upgrade

While all of WEX Inc's (NYSE:WEX) businesses are well-positioned for near-term tailwinds, its stock is currently trading at a discount to historical levels and appears attractive, according to BofA Securities.

The WEX Analyst: Mihir Bhatia upgraded the rating for WEX from Neutral to Buy with a $233 price target.

The WEX Thesis: The company is likely to report third-quarter revenues and earnings that are higher than the current consensus estimates, driven by stronger fuel revenues and lower provision for credit losses, Bhatia said in the upgrade note.

Referring to WEX's Fleet Solutions business, the analyst said that average U.S. fuel price for 2021 could be around $3.11, meaningfully higher than the guidance of $3.

"WEX estimates every 10 cent increase in fuel prices contributes an incremental ~$0.18 to annual EPS," he added.

"The Health segment should benefit from enrollment season and hiring, as well as, the benefitexpress and Healthcare Bank's HSA assets acquisitions," Bhatia wrote.

"The ongoing recovery in travel, particularly internationally will boost Travel segment revs /outlook and enable WEX to enjoy the benefits of the eNett acquisition in 2022," he added.

WEX Price Action: Shares of WEX were trading 2.95% higher at $183.43 late Wednesday morning.