TravelCenters of America LLC
(
TA
) posted its seventh straight positive earnings surprise in the
second quarter, backed by capital intensive improvements in
existing properties, favorable fuel margins and new acquisitions.
This travel center operator remains extremely cheap with a forward
P/E of 4.6x, a price-to-book (P/B) multiple of just 0.5 and a
price-to-sales (P/S) ratio as low as 0.02. Moreover, the strong
quarter led to positive revisions in earnings estimates,
underscoring TA's Zacks #1 Rank (Strong Buy).
Strong Second Quarter
On August 7, TravelCenters of America reported second-quarter
earnings per share of $1.04, beating the Zacks Consensus Estimate
by more than 22%. The result also rose 4% from last year's $1.00
per share.
Net revenue dipped 2.6% year over year to $2,041.5 million, driven
by a 4.1% decline in fuel revenue, offset in part by a 5.8%
increase in non-fuel revenues. During the quarter, fuel sales
volumes declined by 0.6 million gallons or 0.1%.
Total gross margin expanded 120 basis points to 14.4% compared to
last year, due mainly to travel centers acquired or opened since
April 1, 2011, increased fuel margin per gallon, increased customer
spending for nonfuel products and improved services in TA's travel
centers. EBITDAR (earnings before interest, taxes, depreciation,
amortization and rent) increased 13.5% year over year to $94.1
million.
Earnings Estimates on the Rise
In the last 30 days, all three estimates for 2012 moved upward,
propelling the Zacks Consensus Estimate by 26.2% to $1.30. This
reflects a year-over-year growth of 33.0%. The Zacks Consensus
Estimate for 2013 saw 2 of 3 estimates advance, pushing the Zacks
Consensus Estimate up by 3.2% to $1.28.
Stock is Cheap
TravelCenters' valuation reveals that the stock is largely
undervalued. The company currently trades at a forward P/E of 4.6x,
significantly below the benchmark of 15.0x for a value stock. Other
ratios, P/S and P/B, remain as low as a negligible 0.02 and 0.5,
respectively, well under the cut off of 1.0 and 3.0 for a value
stock.
Furthermore, shares have gained nearly 27% since June 4. In
addition to being a value stock, TravelCenters remains attractive
given its earnings growth prospects.
Founded in 1992, TravelCenters of America is based in Westlake,
Ohio. Engaged in operating travel centers along the United States
interstate highway system, the company operates 240 travel centers
in 41 U.S. states and in Canada, of which 170 operated under the
brand TA and 70 as Petro Stopping Centers. The company's centers
sell gasoline, operate restaurants, provide truck repair
facilities, operate stores and offer other services to travelers.
TRAVELCENTERS (TA): Free Stock Analysis Report
TRAVELCENTERS (TA): Free Stock Analysis Report
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