Overview
JPMorgan reiterated an Underweight rating on Valvoline and held its fiscal 2026 EBITDA forecast steady at $535 million. The firm expects the company will see some near-term growth driven by its recently completed acquisition of Breeze Auto Care and continued positive, but slowing, same-store sales trends. However, JPMorgan cautioned that the costs of integrating Breeze and the business mix implications will exert pressure on margins and could offset benefits from lower base oil prices.
Deal specifics and immediate financial impact
Valvoline completed the cash purchase of Breeze Auto Care for $607 million on Dec. 1 and is in the process of onboarding 162 Breeze locations into its network. Management projects Breeze will add roughly $160 million in revenue and approximately $31 million in EBITDA during the first 10 months of fiscal 2026. The transaction was financed in part with new borrowing; JPMorgan noted the deal will increase pre-tax interest expense by about $33 million.
Margin and integration considerations
According to JPMorgan, Breeze operates at lower margins than Valvoline’s existing store base. Bringing the business into Valvoline’s systems will require upfront investments across several areas, including IT and operational systems, store refurbishments and other administrative expenses. The bank estimates these integration costs will translate into roughly a 1% EBITDA headwind in fiscal 2026.
Recent operating results and near-term outlook
Valvoline’s first-quarter results arrived slightly ahead of expectations, with revenue rising 11.5% year over year. The topline increase was driven by price and product mix. On the cost side, materials expenses rose 5.2%, while service delivery costs climbed 18.6%, a rise JPMorgan attributes in part to the addition of new stores following the Breeze acquisition.
The brokerage expects same-store volumes to expand by about 1% in the second quarter. JPMorgan also flagged potential near-term disruption from winter storms in portions of North America, which could affect volumes and service activity in impacted regions.
Valuation and capital return considerations
JPMorgan observed that the stock currently trades at approximately 12.4 times expected 2026 EBITDA, a level above Valvoline’s three-year average. The firm argued there is limited scope for multiple expansion given several factors it identifies: a maturing pace of store growth, constrained free cash flow prospects and a high proportion of premium oil changes already in the company’s service mix. Based on an 11.5 times multiple, JPMorgan set a $35 price target for the stock.
Bottom line
While the Breeze acquisition and modest same-store sales gains are expected to support growth in the near term, JPMorgan warned that integration costs, lower-margin operations acquired through Breeze and added interest expense could offset much of the benefit. The brokerage maintained its 2026 EBITDA projection at $535 million and kept an Underweight stance on the shares, citing limited valuation upside.