Swift Transportation Is Ready to Roll

 | Sep 13, 2011 | 3:22 PM EDT
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Swift Transportation (SWFT) is a trucking firm that has hit a few bumps in the road since its initial public offering last December. At about $8 in afternoon trading, the stock is down about 27% from its IPO price.

That said, management offered an upbeat outlook in the company's mid-quarter update Monday evening. Swift said that third-quarter results have been running on track with usual seasonal trends -- a slow July, followed by a recovery in August.

As a result, the company expects volumes to grow 4% year-over-year in the third quarter, following similar growth in the second quarter. Management is also targeting 4% annual pricing growth for 2011 and remains comfortable with the 2011 consensus analyst earnings estimate of $0.71 a share.

This upbeat outlook follows solid second-quarter results that Swift delivered in July. The company earned $0.18 per share, matching the consensus analyst estimate, as revenue grew 15% from the previous year, to $850 million.

This isn't Swift's first go-around as a public company. Founder Jerry Moyes took the company private in 2007 and remains with Swift as its CEO.

Speaking of management, company insiders have been actively buying the stock on the open market. Last month, Swift insiders -- led by Moyes -- purchased more than 300,000 shares, or more than $2 million worth of company stock.

No potential investment comes without its risks, however. One concern the market has with Swift is the debt that it still holds from past leveraged buyouts. The company ended the second quarter with $1.84 billion of total net debt.

Even so, management reiterated this week that Swift remains compliant with its debt covenants. The company generates significant cash flow and plans to pay down $140 million of capital leases and debt this year.

Shares of Swift Transportation appear to be disconnected from strength of the company's underlying business. The stock appears oversold at current levels and I believe that Swift can trade back up toward the double-digits by the end of the year.

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