World Fuel Services (NYSE:WKC) (now World Kinect) tumbled more than 8% after BofA double-downgraded the stock to Underperform from Buy, lowering the price target to $22 from $29 in a note.
Analysts said the muted crude backdrop and volume outlook will weigh on the energy services company's stock in the near term.
"We see a challenged fuel-forwarding backdrop given lower demand and expect 2023 EPS to decline 2% year-year (vs +5% prior)," the analysts wrote. "Nevertheless, we view WKC's transition to diversified services positively yet see a more muted outlook weighing on shares."
"Peaking crude prices have historically led a negative EBIT inflection for WKC. Given WTI declining to the $70/barrel range from its 2Q23 high of $83/barrel (and last year's peak of $130/barrel), we could see pressure on our prior EBIT target due to negative leverage from its operating model. Its Marine segment (34% of EBIT) operates primarily in the spot market and thus, rates are based on bunker fuel prices, which remain pressured given weakening liner activity (down 50% from peak)."
BofA lowered its 2023, 2024 and 2025 EPS estimates for WKC by 7%, 11%, and 8%, to $2.00, $2.15, and $2.40, respectively, from $2.15, $2.40, and $2.60.