Celadon Group Inc.
) posted a nearly 22% positive earnings surprise in the fourth
quarter of fiscal 2012, lifting shares of this cross country
truckload transporter by more than 20% over the past month. This
marked the sixth straight quarter of outperforming the Zacks
Consensus Estimate. With attractive valuation metrics, including a
P/E multiple of 12.16, this Zacks #1 Rank (Strong Buy) is a
compelling value pick.
A Mixed Q4
On July 30, Celadon reported mixed financial results for the fourth
quarter of fiscal 2012 (ended June 30). Earnings per share of 39
cents surpassed the Zacks Consensus Estimate by 7 cents (21.9%) and
the year-ago earnings by a convincing 15 cents (62.5%). Total
revenue of nearly $157.5 million increased 4.2% year over year, but
lagged the Zacks Consensus Estimate by 5.6%.
The year-over-year increase in both the top and the bottom line is
due primarily to a 4.1% hike in rates, a decrease in overall
equipment costs, and a reduction in operating and maintenance
expenses. Celadon is focusing on strategic acquisitions in order to
expand its capacity and modernize the fleet. The average tractor
age has been brought down to 1.5 years and trailers to 2.8 years.
Strong Earnings Estimate Revisions
Earnings estimates for Celadon have been rising over the last 60
days. The Zacks Consensus Estimate for fiscal 2013 moved up 9.8% to
$1.34, while the Zacks Consensus Estimate for fiscal 2014 increased
4.1% to $1.54. The current estimates indicate year-over-year gains
of 19.7% for fiscal 2013 and 15% for fiscal 2014.
Shares of Celadon have provided a fairly large return of 34.6%
year-to-date, compared with the benchmark S&P 500 return of
just 14.4%. Going forward, there is an untapped potential locked in
the stock, evidenced by its current forward P/E multiple of 12.16,
P/S multiple of 0.63 and P/B multiple of 1.91 (a P/E ratio below
15.0, a P/S ratio below 1.0, and a P/B ratio under 3.0 generally
indicate value). Other positive multiples include a trailing
12-month ROE of 13.9%, compared with the industry average of 11.2%,
and a current dividend yield of 0.5%.
The earnings growth is reflected in the chart below. The Zacks
Consensus Estimate line indicates a steep upward movement through
fiscal 2015. The chart clearly shows that the stock price is
expected to move much higher than the increasing estimate trend.
Celadon Group Inc. was founded in 1985 and is headquartered in
Indianapolis, Indiana. The company provides long-haul and regional
full-truckload freight services between the U.S., Canada, and
Mexico. Furthermore, Celadon provides web-based B2B services,
warehousing and brokerage services.
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