Chicago-based Echo Global Logistics released a solid trading update last week that boosted its shares, supporting a rally that its price is growing 20% since mid-June.
Total revenues grew 19.4% year-on-year to $443m in the second quarter, while net revenues fared even better, up 22.5% to $85.2m against $69.5m in the prior year.
The year-on-year decrease in fuel prices impacted the top-line by an estimated $19m during the quarter, it said.
The company was in black in the three months ended 30 June, with net income of $1.9m, which compares with a net loss of $700,000 one year earlier. As a result, fully diluted earnings per share (EPS) came in at $0.07 against a loss of $0.03 in the prior year, while non-GAAP fully diluted EPS fell 10% to $0.27 from $0.30.
Echo has posted 27 consecutive quarters of year-on-year revenue growth, but surging revenues were mainly driven by inorganic growth, with the acquisition of Command playing a key part in a corporate strategy where volume gains were offset by lower rates.
Truckload revenue surged 31.6% to $299.5m from $227.7m, while less-than-truckload (LTL) sales were marginally lower at $117.8m due a reduction in rates, including fuel, as well as the “conversion of a client to a fee-based contract”.
In the smaller intermodal unit, revenues rose 6% to $19.4m, and ‘other revenues’ were up 1.7% to $7.1m.
Figures for sales by client type showed a 22.6% surge to $362m in transactional revenues, driven by the Command deal, as well as a 7.2% rise in managed transportation revenues, which hit $81.8m in the second quarter on the back of new client wins.
Net revenue margin, meanwhile, rose 48 basis points to 19.2% from 18.7% one year earlier mainly due to stronger margins in truckload.
Non-GAAP EBITDA was 9.8% higher year-on-year, hitting $18.5m in the second quarter.
However, cash flow from operations fell 24.5% to $19.1m, while capital expenditure more than doubled to $8.5m from $3.8m one year earlier, which is the reason why free cash flow halved to $10.6m on a comparable basis.
Unsurprisingly, cash and cash equivalents dropped almost 30% to $40.1m from $56.5m at the end of 2015, while current assets and current liabilities were on their way up.
Quarterly revenues were higher than consensus estimates, but earnings were softer. Still, its current share price of $24.7 implies rich p/e multiples of 45x and 20x for 2016 and 2017, respectively, which we expect to be supported by more acquisitions and rising operating margins closer to 4% into 2017.
Source: Transport Intelligence, August 2, 2016
Author: Alessandro Pasetti