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11 transport stocks for shopping season
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USA Truck (USAK, news, msgs), another small-cap company, hauls medium- to full-sized loads through the United States from Canada to Mexico, with a focus on industrial machinery, rubber and plastics, paper, metals, chemicals and electronics. Analyst Robert Dunn at Sidoti & Co. gives the company high marks for emerging from a tough 2000-2004 period to restore the profitability that characterized the business in the mid-1990s. In a report two weeks ago, Dunn said USA Trucks operational and financial turnaround is not only firmly under way but ahead of expectations. He sees tractor utilization improving and insurance and maintenance costs diminishing to the point that USA Truck will improve its operating ratio to well above average levels, driving annual earnings gains of up to 30% over the next two years. With a forward multiple of around 15, it looks like another good deal.
Marten Transport (MRTN, news, msgs) might be the best of the bunch. It specializes in temperature-sensitive, full-truckload service -- mostly food -- around the United States, with a focus on routes between California and the Northeast and the Midwest to the South, with an average distance of 1,000 miles. It has posted steady 20% to 30% earnings growth over the past few years. Its operating ratio, the benchmark of these carriers, is among the tops in the business at 91%.
Analysts say strong customer service has allowed Marten to increase pricing by up to 10% this year. Despite all these good metrics, the company still trades at a discount to peers with a forward multiple of 13. Thom Albrecht, analyst at Stephens Inc., says that Marten has a disciplined approach to putting profits ahead of mere growth, and uses its size as a major selling point with large refrigerated-goods shippers.
In short, the economics of profitability-focused companies that carry goods are strengthening. Because this doesnt make sense to many investors, expectations are relatively low. It is this combination of strong operating results and investor skepticism that continues to drive the stock prices higher. Drive on.
Fine print
To learn more about USA Truck, click here. Read more about Marten Transport here. For more on Celadon, read here. Last week, in my column IPOs to warm your hearth, I mentioned that the initial public offering of Under Armour (UARM, news, msgs), which was priced at $10 to $12, would spring out of the gate in the high teens. In fact, demand was quite a bit stronger than that. It finished its first day at $25, and was up another 5% on Monday. Next up on my list is the Mexican restaurant chain Chipotle, which should also do very well in its first week later this year. Its IPO date is not yet on the docket, but you can read more here. Another IPO that might work out well is Tronox, which will price this week. It is a spinoff of Kerr McGee (KMG, news, msgs) focused on the suddenly popular titanium dioxide business.
Jon D. Markman is publisher of StockTactics Advisor, an independent weekly investment newsletter, as well as senior strategist and portfolio manager at Greenbook Investment Management. While he cannot provide personalized investment advice or recommendations, he welcomes column critiques and comments at jon.markman@gmail.com; put COMMENT in the subject line. At the time of publication, Jon Markman did not own or control shares of companies mentioned in this column.
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