Saia surprises investors with stronger second-quarter results

The stock of Saia rose almost 12% last week to $28.9, boosted by a trading update that was better than expected. Despite that rise, its implied valuation based on forward P/E and EV/EBITDA multiples hovers around 15x and 5.3x, respectively, which represents a meaningful discount to peers in the transport industry.

After a difficult first quarter, the US-based less-than-truckload (LTL) provider continues to face a few operating headwinds, but its cash flows held up relatively well in the second quarter. Its gross cash position rose on a comparable basis.

Second-quarter revenues were down 3.7% to $311m from $323m one year earlier, while operating costs dropped only 1% to $290m, which determined a significantly lower operating income, down about 30% year-on-year to $21m.

While its core costs associated with salaries and benefits rose, fuel and transportation costs were lower year-on-year, confirming trailing trends for the first half of 2016.

The group said that the operating ratio – operating expenses divided by operating revenue – came in at 93% in the second quarter compared to 90.3% one year earlier, but cash flows were not impacted although, inevitably, net income fell, down to $13.2m from $19.2m one year earlier.

Based on a share count that was virtually unchanged, basic earnings per share dropped to $0.53 from $0.77 in the second quarter, and fell to $0.95 from $1.28 in the first half of the year.

Despite sagging earnings, operating cash flow was only $1.2m lower at $65.8m in the first half of the year, while cash flow from investing was significantly higher at $101m from $78m one year earlier. Lower debt repayments, however, contributed to a rise in cash inflows from financing, which shored up its gross cash position.

President and Chief Executive Rick O’Dell claimed that despite the challenging freight environment, the group continued to deliver a high level of services and quality to customers.

“We achieved 98% on-time service in the quarter and a cargo claims ratio of 0.77%,” O’Dell said, adding, “The perceived value in those measures, by our customers, enabled us to improve our yield in the quarter. Core operations continued to reach productivity and cost savings goals, but were negatively impacted by accident expense volatility and health care self-insurance during the quarter.

“Our continued emphasis on service and quality resulted in contractual rate renewals remaining positive, up 5.4% in the quarter”.

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Source: Transport Intelligence, August 2, 2016

Author: Alessandro Pasetti