World Fuel Services buys fuel in bulk from suppliers, ensures consistent quality, and manages the delivery of that fuel to its customers. For example, the firm might purchase bunker fuel for a cruise ship operator and arrange the delivery of that fuel to various ports where the cruise ships will refuel during their voyages.

In addition, the company extends credit to customers to facilitate purchases and helps clients hedge against higher fuel costs.

Although World Fuel Services’ aviation and marine business segments account for the bulk of the company’s revenue, management has expanded the firm’s land operations, primarily through acquisitions. Each of its three divisions boasts a top-notch customer base that includes industry leaders such as Royal Caribbean Cruises (NYSE: RCN), tanker operator Frontline (NYSE: FRO), Virgin America airline and FedEx Corp (NYSE: FDX).

Don’t dismiss World Fuel Services’ business model as mundane and boring. Not only do companies worldwide regard fuel-related logistics as essential to their success, but there’s also plenty of scope for the firm to grow its business in coming years. World Fuel Services benefits from three key trends: a focus on cost savings, rising global demand for fuel and ongoing consolidation within the fuel logistics industry.

Consider the importance of fuel prices to a commercial airline or shipping firm–even a slight change in fuel costs can dramatically impact a transportation company’s profitability. Meanwhile, the complexity of supplying a global operation and limiting exposure to volatile energy prices is a formidable challenge that requires significant resources.

World Fuel Services is up to the challenge. With years of experience buying and supplying fuel in 200 countries and territories, the company grasps the intricacies of local markets, the availability of regional refining capacity and supply-demand conditions in various parts of the world. This accumulated knowledge is aggregated in a computer system that aids in decision-making and enables the firm to identify and take advantage of local or regional price differentials. In addition, World Fuel Services’ extensive customer base enables it to obtain bulk discounts and demand the best prices from suppliers.

Keeping energy prices in check is a constant struggle for the transportation industry. By purchasing fuel at the lowest prices possible and passing some of these savings through to customers, World Fuel Services enables transportation outfits to cut costs and simplify their business. The company generates a profit by marking up the price of the fuel it resells and charging for ancillary services.

Although World Fuel Services targets businesses with exposure to commodity prices, the company is somewhat protected from the vagaries of the energy market. Sales may rise and fall with commodity prices, but profits depend on the spread between the price it pays for the fuel and the amount it charges its customers. In most instances, World Fuel Services immediately sells the fuel it purchases to customers, limiting its exposure to shifts in commodity prices. When the company holds or stores fuel for future delivery, hedges mitigate any shift in energy prices.

World Fuel Services’ recent earnings history is a testament to this resilience.

Over the past few years, companies exposed to energy prices have endured an unparalleled stress test. Oil and fuel prices soared through mid-2008 but suddenly collapsed at the height of the financial crisis. From the first quarter of 2009 onward, oil prices have climbed.

Any energy-related company that managed to remain profitable on both the upswing and downswing of this cycle has proved the resilience of its business model. Neither a producer nor a consumer, World Fuel Services is insulated against volatile energy markets.

The proof is in the earnings. The firm managed to grow its earnings per share (EPS) when oil prices increased from 2004 to mid-2008 and when prices collapsed in late 2008 and early 2009.

World Fuel Services’ EPS actually shot up by 154 percent in the third quarter of 2008 and 80 percent in the fourth quarter, largely because of the company’s credit business.

At the height of the financial crisis, banks stopped issuing letters of credit that containership operators and dry-bulk shippers use to finance their cargoes. Low-risk in nature, these short-term credit instruments are based on the value of the goods or commodities being shipped. Banks also stopped offering short-term credit that covered shippers’ refueling and other operating costs.

With a pristine balance sheet, World Fuel Services stepped into the breach, allowing airlines, shipping firms and other customers to purchase fuel on credit. As one of the few lenders in a market with little access to credit, the company posted unusually large profits in the back half of 2008.

World Fuel Services has the scope to further expand its credit services if opportunities arise; the company has plenty of cash on its balance sheet as well as a $475 million credit facility that allows it to borrow money at the ultra-low rate of 1 percent above LIBOR. Moreover, the loan portfolio continues to perform, with bad debt expense generally amounting to less than 1 percent of gross profit.

Although shifts in commodity prices don’t necessarily impact World Fuel Services’ business, rising demand for fuel provides a substantial tailwind: Profits increase with every additional gallon of fuel that the company sells.

The company posted a blowout fourth quarter, generating earnings per share of $0.56–$0.09 higher than the consensus estimate. The company’s full-year earnings were an equally impressive $2.31 per diluted share, a roughly 25 percent increase from 2009. The recent acquisitions of Western Petroleum and Hiller group will be immediately accretive to earnings and expand the company’s position in jet fuel procurement and marketing.

World Fuel Services Corp is a buy under 43.