What happened
Reversing course from their 24% decline in 2018, shares of energy, logistics, and technology solutions provider World Fuel Services (INT 2.11%) have risen 68% through the first six months of 2019, according to data from S&P Global Market Intelligence. In addition to a vote of confidence from Wall Street, the company's success in improving its financial health and announcement of a multifaceted effort to reward shareholders moved investors to pick up shares.
So what
Reporting $39.8 billion on the top line for 2018, World Fuel Services achieved year-over-year revenue growth of 18%, providing investors with an obvious reason to be excited. And there was plenty more in the report to fuel investors' enthusiasm. For one, the company returned to profitability in 2018 and generated diluted earnings per share of $1.89 -- a notable turnaround from the $2.50-per-share loss the company reported in 2017. It wasn't only the income statement, however, that delighted investors.
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Thanks in part to paying down $200 million in debt during 2018, World Fuel Services reduced its leverage and ended the year on firmer footing. Whereas the company ended 2017 with a net debt-to-EBITDA ratio of 4.1, the reduction in debt and 160% increase in EBITDA helped the company to end 2018 with a net debt-to-EBITDA ratio of 1.43.
Besides motivating investors to pick up shares, the company's improved financial position inspired management to reward shareholders by raising the dividend payable in July 66% to $0.10 per share. That's a noteworthy raise, as the dividend had remained unchanged since March 2015.
That wasn't the only demonstration of management's attempt to increase shareholder value though. In a late-May announcement, World Fuel Services revealed its approval of a $100 million increase to the company's share repurchase program announced in October 2017. Consequently, the available authorization remaining under the program is now approximately $150 million.
Last, a positive nod from Wall Street represented another catalyst for investors. In early March, Seaport Global upgraded World Fuel Services' stock to buy from neutral, according to TheFly.com. In addition, the analyst, Kevin Sterling, set a $40 price target on shares. At the time of the upgrade, shares were trading hands at approximately $28 apiece.
Now what
While investors celebrated World Fuel Services' turnaround in 2018, the company anticipates continued improvement in the remainder of 2019, providing investors with something to monitor in the coming quarters. On the Q1 2019 earnings call, for example, management stated its target of reducing the operating expense ratio 250 basis points -- a target that comes in addition to the 425-basis-point improvement achieved in 2018.
