TimesSquare Capital Management, LLC on Valvoline Inc.
Thesis
TimesSquare added to Valvoline after an earnings-driven share-price pullback, believing the disruption to margins from oil-related input costs is temporary. Comparable sales grew 8%, ahead of expectations, confirming underlying demand resilience. Management projected that tighter oil supplies linked to the Strait of Hormuz could affect profitability for four to six months even after reopening. The same pressure is expected to hurt smaller competitors more than Valvoline, potentially strengthening its relative position as conditions normalize.
“As a result, we added to the position on the pullback.”
Key risks
- Constrained oil supplies around the Strait of Hormuz have increased input costs.
- Near-term profitability guidance came in below consensus.
- Management expects cost pressure to linger four to six months after the strait reopens.