Valvoline's Strong Brand Should Drive Returns
We think the company can leverage its domestic product lineup as it grows internationally and builds its instant oil change presence.
We believe Valvoline’s (VVV) strong recent performance amid oil price volatility and a changing vehicle fleet is indicative of its brand strength, a competitive advantage the company can use to capitalize on favorable industry dynamics. Since its 2016 initial public offering, Valvoline has benefited from attractive domestic industry conditions that have underpinned top-line growth for its core motor oil products and its Valvoline Instant Oil Change centers. Low gas prices and an improving employment picture (an indicator of commuter miles driven) have increased overall vehicle miles driven in recent years; while growth in miles driven has ebbed of late as fuel prices have risen, motorists are still driving more, and the metric has expanded annually since 2011.
Motor oil demand has also benefited from an aging light-vehicle fleet. Improving vehicle quality has helped push the average age of the fleet to nearly 12 years, with relatively stable scrappage rates despite light-vehicle sales that remain near record highs. Motorists with older vehicles are more likely to rely on third-party oil change facilities than those with new cars, who often go to dealerships for service. The vehicle aging trend appears robust; according to IHS Markit, the number of vehicles 6-11 years old will increase 5% and vehicles 12 years or older will grow 10% over the next five years, with vehicles 16 years or older forecast to grow 30% over the same period.
Zain Akbari does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.