The road trip is one of the most popular American pastimes.
Since the invention of the automobile, we have developed an
entire culture around cars. Traveling across the country inspired
generations of Americans and popularized colloquialisms like "get
your kicks on Route 66."
When I was growing up, my vacations centered on packing up the
car and hitting the open road. The destination was almost
secondary to the adventure of the trip itself. I loved the
changing landscapes, roadside diners and cute little towns so
much that I made over-the-road truck driving my career for a
Driving for a living meant that my home was wherever I parked for
the night. I needed space to park, fuel, somewhere to eat, a
shower, and a place to buy basic necessities. The rumble of
idling engines and the smell of diesel fuel were oddly
You've probably already guessed that I'm talking about the truck
There are more than 6,000 truck stops across the United States,
but the industry is basically an oligarchy made up of three major
companies: Pilot Flying J, Love's and
TravelCenters of America (
, which also owns Petro. Most trucking companies deal only with
the major chains due to contractual deals made for their fleets
to save on fuel costs, the industry's biggest expense.
TravelCenters of America is the largest publicly
traded truck stop chain.
Both Love's and Pilot Flying J are privately owned, making
TravelCenters of America, known as TA, the largest publicly
traded truck stop chain.
The trucking industry is often seen as a leading economic
indicator for investors, and the numbers are beginning to turn
around. Freight volumes rose 1.7% in August and 2.7% in September
mostly due to the growing strength in the manufacturing sector.
The hangover from the electronic hours of service logs enacted by
the Federal Motor Carrier Safety Administration has hampered
preventing growth, but as drivers pick up on the new technology,
wages could rise, spurring a wave of growth to keep up with
rising demand -- which would translate directly into more
business for TA.
Hospitality Properties Trust (
spun off TA in 2007 but retains a controlling interest, with 8.6%
of outstanding shares and a lease agreement in which real estate
is owned by HPT and is leased back. TA operates 247 locations in
42 states and Canada, and all but 30 locations are leased
In anticipation of more trucks being converted from diesel to
natural gas, TA has begun a partnership with
Shell (NYSE: RDS)
to install natural gas fueling lanes at as many as 100 locations.
The first LNG lanes are expected to be operational in early 2014.
When it comes to services, including Iron Skillet restaurants or
the variety of goods sold in its stores, TravelCenters of America
remains the top choice for truckers. About 20% of TA's revenue is
derived from non-fuel sources, a category that saw growth of 9%
for the second quarter.
A soft economic environment caused TA to miss its most recent
earnings figures but may have also sent the stock into value
territory. With a price-to-earnings (P/E) ratio of around 11, the
company looks cheap. With earnings per share (
) expected to grow more than 200% next year to around $1.07, this
gives the company an attractive price-to-earnings growth (
) ratio of 0.7.
Even with headwinds like leasing obligations and fuel price
volatility, investors have been betting on the U.S. recovery
being real -- TA's stock price is up about 65% this year.
Risks to Consider:
The case for increased pay and more drivers is subject to
continued economic demand, which could be damaged by
weaker-than-expected GDP figures. Fuel price volatility could
also cause fluctuations in earnings.
Actions to Take -->
The catalyst of increasing freight volumes should keep TA
climbing higher. Based on expected future earnings, my price
target is about $12.75, a 60% gain.