Daily Gains Letter

Trucking Company Bucking Industry Trend with Record Revenues

By for Daily Gains Letter |

250213_DL_whitefootThe first round of unemployment numbers are in for 2013 and things continue to look bleak. In November 2012, unemployment stood at 7.7%; it rose to 7.8% in December, only to rise once again to 7.9% in January.

An escalating unemployment rate does not bode well for a strong economic recovery in 2013.

According to the American Trucking Associations (ATA), trucking serves as a barometer of the U.S. economy; trucking accounts for the transport of roughly 70% of all tonnage carried by all modes of domestic freight transportation. A further 80% of U.S. communities receive their goods exclusively by truck. (Source: “American Trucking Associations: Trucking and the Economy,” American Trucking Associations web site, last accessed February 22, 2013.)

Because trucking accounts for such a large majority of deliveries, a slowdown in consumer spending could negatively impact the industry. The ATA expects slower tonnage growth in 2013 compared to 2012, as a greater number of housing starts and auto sales offset slower factory output and consumer spending. (Source: “ATA Truck Tonnage Index Rebounds 3.7% in November,” American Trucking Associations web site, December 18, 2012, last accessed February 22, 2013.)

Not all trucking companies could feel the pinch. A number of logistic freight companies are bucking the trend.

Wabash National Corporation (NYSE/WNC) is one of North America’s top manufacturers of dry freight and refrigerated vans, and flatbed and drop-deck trailers. The trailers are marketed under several brands, including DuraPlate, ArcticLite, and RoadRailer. Customers have included Averitt Express, FedEx, Knight, SAIA, and Swift.

The company has a market cap of $632 million, a forward price-to-earnings (P/E) ratio of 7.6, and $81.4 million in cash.

For the fourth quarter and fiscal year 2012, the company reported year-over-year and sequential improvement across a number of financial and operating metrics. Fourth-quarter revenues were up 21% year-over-year at $416 million. Adjusted earnings were up 189% at $21.7 million, or $0.32 per diluted share. (Source: “Wabash National Corporation Announces Fourth Quarter and Full Year 2012 Results,” Marketwire, February 5, 2013.)

For the second consecutive quarter, the company reported a record level of income from operations totaling $29.2 million for the fourth quarter of 2012, compared to income from operations of $8.4 million for the fourth quarter of 2011.

For fiscal 2012, revenues were up 22% at a record $1.5 billion. Adjusted earnings for the twelve months ended December 31, 2012 totaled $64.8 million, or $0.95 per diluted share, compared to net income of $15.0 million, or $0.22 per diluted share, on net sales of $1.2 billion for the twelve months ended December 31, 2011.

Richard Giromini, President and CEO of Wabash, stated, “The execution of our long-term strategy, which is focused on profitable growth, margin improvement through operational excellence initiatives, reducing the volatility of our operating results through diversification initiatives as well as improved balance sheet strength, continues to result in considerable momentum throughout our business.” (Source: Ibid.)

On January 25, 2013, the company announced that it agreed to acquire certain assets of the tank and trailer business of Beall for approximately $15.0 million as part of a Chapter 11 bankruptcy process. The purchased assets, including the Beall brand, are a strong fit with the company’s diversified products segment; they are expected to provide growth opportunities via new products, new markets, and geographic expansion.

dl_02252013-image002Chart courtesy of www.StockCharts.com

After bottoming out in June and July, Wabash’s share price gained momentum in August and September, turning bearish in October. The company reversed the downtrend in early November, climbing 25% on the heels of strong third-quarter results. Since then, Wabash’s share price continues to be bullish, with higher successive pullbacks. In mid-December, the company’s 50-day moving average (MA) crossed above its 200-day MA—a bullish indicator. The company’s share price is currently trading above its 50-day MA and has been testing support near $9.50.

Going forward, strong first-quarter results could send Wabash’s share price higher; but it’s important to remember that, historically, Wabash has tested resistance near both $11.00 and $13.00. Still, strong quarterly results could help the company’s share price break out to the upside.

While increasing market penetration is always on the radar, in uncertain times, it’s equally important for freight companies, like Wabash, to manage costs in conjunction with current economic conditions.

Commenting on the future, Giromini continued, “As we look forward to 2013 with a healthy backlog of orders totaling $666 million, a trailer demand forecast above replacement levels for the second consecutive year…a full year of Walker [acquired in May 2012] in the portfolio as well as our continued efforts to optimize our manufacturing processes while also remaining selective in our order acceptance, we believe 2013 has the potential to be another record year for Wabash National.” (Source: Ibid.)

Wabash continues to be a profitable, fundamentally solid company with growing revenues and great short- and long-term growth potential. The company has demonstrated that it can grow in a weak economic climate, and it is well positioned to capitalize on any economic rebound.

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