- Saia (NASDAQ:SAIA) is an LTL trucker growing its network.
- The company's Q3 results prove the strategy is working.
- The best part is growth is self-funded and the balance sheet is a fortress.
Wondering when Saia (NASDAQ:SAIA) stock could start moving higher? The best answer is any time because this trucker is growing. Saia is a niche operator in the supply chain, running a nationwide network of LTL trucking hubs and shipping services. The company has been working hard over the last two years to build out its network and plans to increase its investments in the coming year. Based on the company’s guidance, cap ex will grow nearly 80% in the coming year, which means another 10-15 terminals and improvement in technology and other operating areas.
Saia Moves Up On Mixed Results
Saia stock has been bottoming for the last three quarters, and it looks ready to move higher now. The Q3 results have the price action up in early trading and are supported by indicators that not only is a bottom in play, but a rebound is brewing. The results show revenue is up 18.4% versus last year on a combination of new terminals and pricing increases.
The good news is that revenue also outpaced the consensus by a small margin, but that strength did not carry through to the bottom line. Internally, results are driven by a 2.5% decline in LTL shipments per day, a 0.4% decline in tonnage per day, offset by a 17.5% increase in revenue per hundredweight, and a 20.1% increase in revenue per shipment.
The margin and earnings are where the results are mixed but this is only relative to the analyst's consensus estimates. The company reported a 40 basis point improvement in the operating ratio, more than 100 bps on an adjusted basis, resulting in outsized growth on the bottom line.
The company reported $3.67 in adjusted EPS for a gain of 23% versus last year, but the earnings missed consensus by $0.03 or 80 bps. The miss isn’t something investors want to see, but the margin of error is small and easy to overlook in favor of other metrics. Those include the company’s cash flow and balance sheet.
The company’s cash flow is allowing it to fund its expansions. The company ended the quarter with nearly $150 million, which is up double-digits from last year and accompanied by a debt reduction. The balance sheet is net cash with a growing cash difference and is in good shape to continue funding expansions and reducing debt.
Saia Is At An Extreme Low
Saia is trading at an extremely low level, and the analyst's sentiment suggests it could rebound 35% or more in the coming months. The current consensus rating on the stock is a Moderate Buy with a price target of $262. The Marketbeat.com consensus rating has been steady over the past year, but the price target has come down a bit due to expectations of slowing economic growth.
The takeaway is that price action holds the firm at the bottom while the company outperforms, and the analysts see some upside. Assuming the Q3 results and outlook spur new bullish activity, this stock could quickly begin moving higher, as could the consensus rating. Trading at 14X earnings, it is moderately valued among truckers and may even see some multiple expansions.
The big boys like JB Hunt Transport Services Inc (NASDAQ:JBHT) and Old Dominion Freight (NASDAQ:ODFL) are trading at 17X and 23X their earnings, and they don’t have the same outlook for expansion.
The Technical Outlook: Saia Is At The Bottom
Unless there is some change to the fundamentals or the outlook, Saia appears to be at the bottom of its downtrend. Price action has been bobbing near $200 since early spring and is starting to look like a Double Bottom or possibly a Head & Shoulders reversal pattern. If the market can get above the short-term EMA, the pattern will become more bullish, leading to an updraft and the $240 level. If not, Saia may be stuck at these levels until there is some more clarity in the general economic outlook for 2023.
