A Rising Tide Lifts All Ships, But Saia Is Rising Faster
There is a rising tide of demand lifting the entire trucking industry and Saia is no different. What makes Saia (NASDAQ:SAIA) different from competitors like J.B. Hunt (NASDAQ:JBHT), Old Dominion (NASDAQ:ODFL), and even Schneider International (NYSE:SNDR) is its focus. Where those companies are diversified carries with operations spanning International/Intermodal through the final-mile Saia’s business is delivering partial loads via truck and its business is accelerating.
The company issued a mid-quarter update in early December that showed business accelerated from the 1st to the 2nd month of the period and that trend is only strengthening. Not only is consumer spending strong and improving but inventories are down across the entire supply chain. The scramble to catch back up is going to drive the need for shipping.
Saia Blows Past Consensus, Margins Widen
Saia reported a great 4th quarter and one that was better than the analysts expected. The company’s top-line revenue grew 7.5% from last year to $476.48 million and beat the consensus by 400 basis points. The strength is due to the combination of higher shipment volume compounded by higher tonnage, revenue per hundredweight, and revenue per shipment. The company says net volume is up 3.6% by # of shipments, the total tonnage is up 6%, revenue per hundredweight 1.2%, and revenue per shipment is up 3.5%.
Moving down the report, the company’s operating ratio improved by 140 basis points on an adjusted, ex-fuel surcharge, basis. The gains are due to increased pricing compounded by higher volumes which were again compounded by the company’s repositioning and reorganization. At the operating level, income grew by 84.6% to fuel an 86% YOY increase in GAAP earnings. The GAAP earnings came in at $1.51 to beat the consensus by $0.22.
“Moving into 2021, we continue to focus our efforts on expansion of our network and of course on continuing profitability initiatives,” said Fredrick Holzgrefe, Saia CEO. “We have one planned terminal opening for the first quarter and are reviewing several other opportunities. We continue to see inflationary cost pressures in our business, including our January wage increase and we will work on mix and pricing to cover the cost pressures and strive to improve margins in our business.”
Saia, In Good Shape But The Shares Are Overpriced
Saia has a robust outlook for growth with a double-digit CAGR expected over the next three to five years. Along with that is a healthy balance sheet that is only marred by the fact the company doesn’t pay a dividend. The problem is that Saia is trading at 30X its 2021 earnings estimate that, even with the expectation of better than consensus results, has the stock trading far too richly for our taste. Shares of J.B. Hunt and Old Dominion pay dividends, albeit small ones, and trade at 20X and 25X earnings. Smaller carrier Schnieder trades at 15X earnings and yields 1.25% and comes with a positive outlook for distribution growth. The takeaway is that there are other truckers you can buy at better prices that come with yield.
The Technical Outlook: This May Be The Time To Sell Saia
Shares of Saia have staged a robust rally since the March 2020 lows and are a leading stock in the transportation sector. The caveat is that now may not be the right time to load up on shares. The Q4 report sparked a round of buying but resistance set in at the all-time high and it looks like a correction may be in order. If the price action is not able to resume to the trend and falls below the short-term 30-day EMA a drop to the $160 level may follow.
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