After the markets closed last night, Valvoline (VVV) reported fiscal first-quarter earnings per share (EPS) of $0.35 vs. $0.27, which was $0.05 better than expected.

Sales increased a better-than-expected 9% to $607 million, as lubricant volume rose a surprising 3% and Quick Lube continued its recent strength, with same-store sales up 8.3%. While the company warned that higher raw material costs and lower lubricant volumes would hurt results for the rest of the year, VVV still raised its earnings per share (EPS) guidance for the September 2020 fiscal year to $1.40 to $1.51 from $1.37 to $1.48 based on the strength of the first quarter.

The stock is over 5% higher today, even though it remains off its best levels and below the nearly $24 a share it had traded at in early November. While there may be some disappointment that the full-year guidance was not raised further, I believe that Valvoline is just being cautious. I anticipate that EPS for the year will come in towards the top of the $1.40 to $1.51 range. This would represent a solid 7% improvement over last year, despite investment in Quick Lube’s future growth.

The stock is a solid investment that is trading at 15X this year’s estimate. Buy VVV below $22.50. My target is $26.