Valvoline Inc. (VVV) Shares Jump 8.7% on First-Quarter Earnings Beat and Network Expansion

Shares of Valvoline Inc. (NYSE: VVV) rose 8.7% to $36.18 in Wednesday morning trading after the automotive service provider reported fiscal first-quarter 2026 results that exceeded profit estimates. While reported revenue was slightly below consensus, strong same-store sales and the integration of the Breeze acquisition supported a positive outlook for the fiscal year.

Company Description

Valvoline Inc. is a leading American retail automotive services company specializing in preventive maintenance. The company operates and franchises a vast network of service centers, primarily under the Valvoline Instant Oil Change brand, offering oil changes, battery replacements, and fluid maintenance. Its business model focuses on high-velocity, non-discretionary retail services for consumer and fleet vehicles across North America.

Market Performance and Valuation

• Current Stock Price: $36.18 (as of Feb 4, 2026)
• Market Capitalization: Approximately $4.61 billion
• 52-Week Context: Valvoline has traded between a low of $28.50 and a high of $41.33 over the last 12 months. Today’s move represents a rebound as the company demonstrates operational leverage following its strategic shift to a pure-play service model.
• Valuation: The stock carries a forward price-to-earnings (P/E) ratio of approximately 21.5x based on the midpoint of its 2026 guidance. This multiple reflects the company’s aggressive store-count expansion and high return on capital.

First Quarter Fiscal 2026 Results

Valvoline reported results for the quarter ended December 31, 2025:

• Net Revenue: $461.8 million, an 11.5% increase year-over-year, slightly missing the $466.9 million market estimate.
• Adjusted Diluted EPS: $0.37, surpassing the analyst consensus of $0.34.
• System-Wide Same-Store Sales (SSS): Grew 5.8%, driven by pricing and premium product mix.
• Margins: Adjusted EBITDA margin expanded 60 basis points to 25.4%. Adjusted gross margin rose to 37.4%, benefiting from labor and product cost efficiencies.
• GAAP Performance: Reported a loss from continuing operations of $32.2 million ($0.25 per share). This was primarily driven by a $57.9 million pre-tax loss on the FTC-mandated sale of 45 Breeze stores to Main Street Auto LLC.

Full-Year 2026 Guidance and Forecasts

The company reaffirmed its fiscal year outlook, incorporating the Breeze acquisition:

• Net Revenue: Projected at $2.0 billion to $2.1 billion.
• Adjusted EPS: Forecasted at $1.60 to $1.70, consistent with the $1.67 consensus.
• Network Growth: Added 200 net new stores in Q1 (including 162 from Breeze), bringing the total to 2,380 locations. The company expects Breeze to contribute approximately $160 million in revenue and $31 million in EBITDA for the 10 months of ownership in FY2026.
• EBITDA Headwind: Management expects a 100 basis point EBITDA margin headwind for the full year as it integrates the immature Breeze units.

Macro Pressures and Risk Factors

• Leverage and Debt: Total debt rose to $1.7 billion following a new $740 million Term Loan B to fund the Breeze deal. The net debt-to-Adjusted EBITDA ratio stands at 3.3x, above the 2.5x target.
• Interest Expense: Higher debt levels are expected to increase pre-tax interest expense by approximately $33 million in fiscal 2026.
• Geopolitical/Trade Exposure: Indirect risks remain from tariffs on imported automotive components and base oils, though the company’s operations are primarily North American.
• Operational Control: The company continues to report a material weakness in internal control over financial reporting related to its ERP implementation, though remediation is ongoing.

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