Saia Inc. says acquisitions and improved margins will power trucker’s growth
During a morning conference call, Saia, Inc. (Nasdaq: SAIA) CEO Rick O’Dell said the trucking company’s recent acquisitions will power future growth in a challenging economic environment. In May, Saia completed the integration of Madison Freight Systems and The Connection Company, which gave the company substantial carrier coverage in the Midwest.
“Considering the environment, I’m pleased with the top-line growth driven by recent acquisitions and I remain enthusiastic about the potential of the expanded geography. We expect the acquired geography to contribute positively to operating income in the fourth quarter of this year and into 2008,” O’Dell said. “Looking forward, we believe Saia is well positioned for long-term profitable growth and value creation for both shareholders and customers.”
Before the opening bell, the Duluth, Ga.-based company reported net income of $7.4 million, or $0.51 per share, for the second quarter ended June 30, compared with a loss of $35.9 million, or $2.42 per share, a year earlier. Saia recorded quarterly revenue of $252.8 million, compared with revenue of $224.8 million for the same three months of 2006. Analysts were expecting EPS of $0.62 on $254 million in revenue.
The company’s quarterly profit was damaged by truck accidents. During the quarter, Saia’s quarterly insurance and claims expenses rose to $9.4 million, from $6.7 million in the second quarter of 2006. In the most recent period, the increased accident severity was enough to offset the lower frequency of crashes. The company’s accident problems have also continued into the third quarter, CFO Jim Darby said.
“Due to our self-insured structure and $2 million retention level, our company will experience accident expense volatility,” Darby said.
The company’s rigorous driver screener, defensive driving education, pre-shift meetings on safety techniques, collision warning and radar systems will minimize volatility, O’Dell said. Saia is communicating with employees that its safety record is delaying wage increases until December, he said.
“I’m confident that over time these programs will generate a solid safety record and competitive cost performance,” O’Dell said.
Due to soft economic conditions that have increased competitive pricing pressure, the company does not anticipate any further acquisitions for the moment, O’Dell said. However, Saia does expect to purchase properties in Chicago and southern California worth $30 million during the third quarter, Darby said.
O’Dell said the company did not achieve targeted margins. The company’s margins were hurt by increased expenses in fuel, worker compensation and pricing pressure
“Obviously it was a difficult quarter for Saia in a challenging environment,” he said. “We do remain pleased with our prospects for growth due to our expanded geography and do expect to improve our margins on this new business over a period of time going forward.”
On Monday, investment firm Bear Stearns downgraded Saia to “under perform” from “peer perform.” Analyst Edward Wolfe said “rapidly deteriorating industry pricing fundamentals” will negatively impact Saia over the next year.
In midday trading, shares of Saia are near a year-low at $21.60, down $3.24 or 13.04%. Over the last 52 weeks, shares have ranged between $21.33 and $36.17.
