The cycles of life affect all. Even the trucking stocks. And after several
long years of pain, the heavens are shining brightly. The industry has dropped over
ten percent of capacity thru bankruptcies thereby enabling a firmer price structure.
An improving economy has provided the foundation for freight rate increases of
3% or more. Indeed, in some areas of the nation, truck capacity is in short supply.
And while higher fuel prices hurt, truckers are generally able to include surcharges
which capture about three fourths of the increase.
These are good times for the transportation industry and trucking stocks
have participated quite nicely. But not all. Smithway Motor Xpress is now
hoping to join the party.
Smithway Motor Xpress (smxc) is a nationwide diversified freight shipper operating
primarily in the middle of America. Profitable for years, it hit an icy patch in
the 2002-2003 period from which it is engendering to recover. Terminals were
closed, office expenses reduced and unseated trucks disposed in the initial
phase of the turnaround. Now with sustained profitability in sight, management is
focusing on upgrading the tractor fleet while continuing cost controls and
and revenue growth.
Probably some corporate details are in order. Located in Fort Dodge,
Iowa , SMXC came public in 1996. Currently it operates from 18 terminals
running over 1200 tractors and 2200 trailers employing 900 people as well
as 450 independent operators.
Revenues were $165 million in 2003 with $170 million anticipated for 2004.
A net loss of $ 2.58 million was reported in 2003 and with 4.85 million shares outstanding it resulted in $ .53 per share loss. For the first quarter of 2004, sales increased to $43.6 million from $39.9 million with a loss of $392.000,
or $.08 compared to a loss of $1.6 million or a loss of $.32 per share for the
same time last year. Best guess for current year- $170 million of revs and $.20 eps.
Long term debt at $25.4 million represented 55% of capital.
Obviously the big question is what can you do for me next year. Management
has stated in the past they hoped to take out $7 million from costs and operating efficiencies. In years past, Smithway was able to hit a low 90’s operating ratios and
it would seem with cost cuts, volume increases and price increases it could approach
a reasonable ratio again. Management has no problem with this view.
Using $180 million sales rate in 2005 with operating margin of 5% results in
$9.0 million operating profits less $3 million interest costs for $6 million in
pretax. Using a 40% tax rate and 5.0 million shares suggests a $0.60 eps.