These Truckers Keep on Rolling

 | Feb 11, 2013 | 10:30 AM EST
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In mid-September, I profiled several trucking and transportation logistics companies. I wrote at the time that the recently announced quantitative easing program from the Federal Reserve would goose activity in the transport sector. Also, these companies had no exposure to the deep decline in coal traffic that affected railroad operators. All the stocks are up since being profiled, led by Swift Transportation's (SWFT) return of better than 70%, followed by Arkansas Best (ABFS), which has gained a third since mid-September.

I still believe the sector offers bargains, as the housing recovery seems to be real and economic activity should accelerate -- if we can get through the next few months in Washington without any major damage to the economy.

Here are two smaller companies in the sector whose stocks have significant upside if the economy improves in 2013.

Pacer International (PACR) provides asset-light transportation and logistics services. It operates in two segments, Intermodal and Logistics.

Four reasons PACR has additional upside from just over $4 a share.

  • The company recently reported earnings that beat expectations, and Stifel Nicolaus raised its price target to $6 a share on the back of the improved results.
  • Pacer has a solid balance sheet, with just under 15% of its market capitalization represented by net cash on the books. Several insiders made new purchases in late November as well.
  • The stock sells at just over 10% of annual revenue, and near the bottom of its five-year valuation range based on price-cash-flow, price-sales and price-book ratios.
  • The company benefits from the solid growth in trade between Mexico and the U.S. through a contract it has with Union Pacific (UNP). The stock sells at less than 12x 2014's projected earnings per share, and it has a reasonable five-year projected PEG of 1.10.

Universal Truckload Services (UACL) operates as an owner-operator and agency-based truckload motor carrier in North America. It transports various general commodities comprising machinery, building materials, paper, food, consumer goods, automotive parts, furniture, steel and other metals.

Four reasons UACL has upside at under $17 a share:

  • Universal is experiencing solid revenue growth. Sales grew by more than 12% in 2012 and analysts believe it has more than 30% sales growth ahead for 2013.
  • Earnings are growing nicely. The company posted just under a $1 of EPS in 2011, but is on track to post approximately $1.15 per share in earnings in 2012. Consensus earnings estimates for 2013 currently stand at $1.42 per share.
  • The company has a solid balance sheet with some net cash on the books, and insiders have been net purchasers of the stock over the last six months.
  • UACL sells for less than 12x forward earnings and the stock is trading near the bottom of its valuation range based on price-earnings and price-cash-flow ratios.

Note: I plan to cut my SWFT position in half this week given its huge recent run.

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