Bear of the Day: TravelCenters of America (TA)

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If you've ever taken a road trip in the U.S., there's a good chance that you've come across a TravelCenters of America (TA) travel center. The company is a full-center national travel center chain, with nationwide locations that serve hundreds of thousands of professional drivers, including virtually all major trucking fleets, and other highway travelers each month.

The company operates under the TravelCenters of America, TA, and Petro brand names, and offer diesel and gasoline fueling services, restaurants, heavy truck repair facilities, stores, and other services.

Third Quarter 2017 Results

Last quarter was not one of TravelCenters' best.

The Zacks Rank #5 (Strong Sell) stock posted earnings of 8 cents per share that came in well below the Zacks Consensus of 22 cents per share, representing a negative surprise of 63.6%.

Total revenues of $1.58 billion also missed the Zacks Consensus of $1.62 billion.

In its Travel Centers segment, though, both of TA's fuel and nonfuel revenues increased, which resulted in an increase in total revenues of $101.5 million, or 8.2%.

For its Convenience Store segment, fuel revenues increased by $10.4 million thanks to increases in market prices for fuel, but nonfuel revenues decreased mostly due tp a result of the mix of products and services sold.

At the time of this report's release, TA was involved in a litigation case with financial solutions company Comdata, and fees and expenses involving this matter impacted its Q3 results.

TA tentatively reports Q4 results on Feb. 27.

Mixed Outlook

Earnings growth estimates have kind of been all over the place for TA.

For its current quarter, just one analyst has revised their estimate upwards in the last 30 days. The Zacks Consensus Trend has also moved higher, from $-0.07 to $-0.05, in the past 30 days.

TA's current year estimate trend has moved marginally higher, from $0.70 to $0.71, but compared to the prior year period, earnings are expected to surge over 1,500%.

However, looking at next fiscal year, one analyst cut their estimate downwards in the last 30 days, and the estimate trend has gone from flat to a loss of a penny per share for the period. Earnings are expected to decline over 100% for this fiscal year.

Will Shares Be Able to Rebound?

Shares of TravelCenters are down almost 40% within the past one year.

TravelCenters of America LLC Price and Consensus

TravelCenters of America LLC Price and Consensus | TravelCenters of America LLC Quote

TA currently trades at a forward P/E of 7.43.

It's important to consider that TA's business is seasonal, and the company tends to report losses in the colder months and profits in the warmer months (this is certainly evidenced by the up-and-down estimate projection trajectory).

And this profit uncertainty makes sense for a company like TravelCenters, as most motorists and travelers generally take their big vacation road trips during the summer months, despite consistent trucking traffic throughout the year.

Additionally, TA has made some skillful acquisition deals, though its management team just can't seem to make them count; operating margins have declined and shares have plunged, especially over the last two years.

Because there's value in the company's overall business, the company could be ripe for a turnaround or even a takeover down the line. But, there needs to be a major pivot in direction for TA, or the company will just continue to struggle.

For investors looking for a broader retail stock with more near-term potential, they should consider MarineMax Inc. (HZO), a Zacks Rank #1 (Strong Buy) stock that anticipates earnings growth of more than 45% for its current quarter.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Investing Ideas , Stocks
Referenced Symbols: TA , HZO

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