Saia Inc. (NASDAQ: SAIA) has delivered six straight positive earnings surprises that helped its stock price soar nearly 70 percent in the past year. This multi-regional less-than-truckload (LTL) transporter has generated an increase of 177 percent in earnings in that time, as it benefits from a gradual recovery in the US transportation sector, higher pricing power and initiatives for industrial engineering.
On January 30, Saia reported full-year 2012 earnings per share (EPS) of $1.94, which topped year-ago earnings by an impressive 177 percent. Net income was $32 million compared to $11 million the prior year, an increase of 190 percent year over year.
Total debt was $60.7 million at December 31, 2012. This compares to total debt of $72.9 million at December 31, 2011. Net of the company’s $0.3 million cash balance at quarter-end, net debt to total capital was 19.2 percent.
The company’s strong operational efficiencies are clearly visible through several operating metrics in the recently reported 2012 year-end report. Operating ratio (a key indicator for the transport sector) improved 2.6 percent to 94.7 from 97.3 in the year-ago quarter. LTL yield was up 6 percent due to effective yield management and fuel surcharge revenue.
A few specifics that contributed to the positive results in the fourth quarter were industrial engineering initiatives and corresponding operational efficiencies that reduced purchase transportation miles per day by an impressive 24 percent compared to the fourth quarter of last year.
Fuel efficiency, supported by electronic on-board devices, improved by 2 percent quarter-over-quarter and is up 7 percent since it started this project.
In July 2012, Saia acquired Robart Transportation Inc. and its subsidiary, which supports Saia’s strategic goal of diversifying its service portfolio to provide further growth opportunities over time. The companies are now rebranded as Saia TL Plus and Saia Logistic Services. In January, the company began offering this additional suite of services to Saia’s customer base and expects to see increased cross-selling as it moves through 2013.
This uptrend should encourage investors. The stock is likely to continue rising, in tandem with a strong US transportation industry. Saia is investing extensively to replace its older tractors and trailers, as well as in technological improvements such as enhanced fuel efficiency.
Saia currently looks attractive with respect to several valuation metrics. The stock’s trailing price-to-earnings (P/E) ratio of 14.6 indicates a discount of 22.3 percent from the Road and Rail industry’s average P/E of 18.8. Similarly, Saia’s current price-to-sales ratio of 0.40 is at a massive 500 percent discount to the Road and Rail industry’s average of 2.41.
Saia is projected to post EPS of $2.30 in 2013, which is an 18.6 percent increase from 2012. EPS is also projected to grow 18 percent to $2.72 in 2014.
The average broker rating is a “strong buy” with a 1.5 rating. The equity summary score is 8.4 out of 10 for a Bullish outlook among analysts covering the stock.
Saia Inc. has a conservative 12-month price target of $34.50, an increase of 16 percent from current stock price levels.
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Greg Pugh, an income-investing expert, publishes a newsletter called Investing for Monthly Income.
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