Join        Login             Stock Quote

Arkansas Best (ABFS) Upgraded To 'Sector Perform' By RBC Capital, PT Cut To $13

 June 15, 2012 03:02 PM

(By Balaseshan) RBC Capital Markets analyst John Barnes upgraded his rating on shares of Arkansas Best Corp. (NASDAQ:ABFS) to "Sector Perform" from "Underperform" on a nice acquisition and in-line mid-quarter update. The brokerage lowered its price target to $13 from $17.

With yesterday's announcements Arkansas Best has done two things that makes Barnes believe his previous "Underperform" rating is no longer warranted. ABFS to acquire Panther Expedited Services Inc. for $180 million. The deal is expected to close on June 15 and management expects the company to have a positive contribution to EPS beginning in 3Q-2012.

Panther is a non-asset based expedited transportation company that generated $215 million in gross revenue and $24 million in EBITDA during 2011. Panther has historically been a fairly moderate grower, with revenue increasing at a 5% compound annual growth rate (CAGR) since 2006.

[Related -Arkansas Best Corporation: Wage Reductions Overwhelm Potential Benefit Increases]

ABFS guided to Panther being accretive to EPS beginning in 3Q-2012. Barnes noted that this does not include any operational synergies, but he expects these to be small and mostly in back office functions initially. He estimates Panther will contribute $0.17 to 2012 EPS (up $0.09/share in 3Q-2012 and up $0.08/sh in 4Q-2012) and $0.31/share to 2013 earnings.

The brokerage narrowed its 2012 loss per share estimate to $0.29 from $0.46, while increasing its 2013 EPS estimate to $0.58 from $0.27.

Separately, ABFS provided 2Q-2012 operational update. Quarter-to-date trends (tonnage down 7% year-over-year, revenue/CWT up 6%, revenue down 1% and a modest operating profit) are inline with the analyst's expectations.

[Related -Arkansas Best Corp. (NASDAQ: ABFS) Upgraded By Citigroup To Buy]

Management also stated that the core business has improved to the point that it should be able to fund capex with cash from operations on a go forward basis. Barnes is encouraged that the company is performing inline with his expectations after several quarters of extremely disappointing results.

Based on the purchase, which gives the company a solid earnings base, the gradual improvement in its core LTL operations and the current valuation, Barnes believes that there is now only modest downside potential to ABFS's share price relative to its peers. He now believes shares have found a bottom from both a valuation and stock price perspective.

That said, the analyst believes the company will need to demonstrate at least several quarters of material improvement in its core LTL operations for the shares to work in any meaningful way. Given the lackluster macro backdrop he believes this is unlikely and that the shares will likely remain range bound.

ABFS is trading up 6.11% at $12.33 on Friday.

iOnTheMarket Premium


Post Comment -- Login is required to post message
Alert for new comments:
Your email:
Your Website:

rss feed

Latest Stories

article imageThe Soda Industry Is Dying - But PepsiCo Will Thrive

Although diet crazes come and go, one trend has become clear: Americans are drinking less soda. Per-capita read on...

article imageDefensive Sectors Lead Hesitant Market, But Traders Honor Long-standing Bullish Support

Last week, the major indexes fell back below round-number thresholds that had taken a lot of effort to read on...

article imageWill Janet Yellen's Outlook Prevail?

Federal Reserve Chairwoman Janet Yellen told the crowd last week that rate hikes are coming. The rise will read on...

Popular Articles

Daily Sector Scan
Partner Center

Fundamental data is provided by Zacks Investment Research, and Commentary, news and Press Releases provided by YellowBrix and Quotemedia.
All information provided "as is" for informational purposes only, not intended for trading purposes or advice. iStockAnalyst.com is not an investment adviser and does not provide, endorse or review any information or data contained herein.
The blog articles are opinions by respective blogger. By using this site you are agreeing to terms and conditions posted on respective bloggers' website.
The postings/comments on the site may or may not be from reliable sources. Neither iStockAnalyst nor any of its independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. You are solely responsible for the investment decisions made by you and the consequences resulting therefrom. By accessing the iStockAnalyst.com site, you agree not to redistribute the information found therein.
The sector scan is based on 15-30 minutes delayed data. The Pattern scan is based on EOD data.