Celadon Group Inc. ( CGI - Snapshot Report ) has delivered positive earnings surprises for the past five consecutive quarters, which has helped its stock price to soar nearly 87% since October 2011. Buoyed by an improving U.S. economy, upgraded equipment fleet and additional capacity, this cross country truckload transporter generated an average earnings surprise of 20.3% in the trailing five quarters. The strong surprise in its fiscal third quarter, along with high future earnings growth potential, helped it become a Zacks #1 Rank (Strong Buy) on May 11, 2012.

A Strong Quarter

On April 24, Celadon reported strong financial results for the third quarter of fiscal 2012, including earnings per share of $0.25 that beat the Zacks Consensus Estimate by 25% and improved 150% over last year’s $0.10.

Total operating revenue of $153.2 million surpassed the Zacks Consensus Estimate by 2.7% and increased 10.5% year over year. Despite facing a significant rise in diesel fuel prices, Celadon was able to deliver solid results due to a 2.7% increase in average revenue per truckload miles.

Celadon focuses on strategic acquisitions in order to expand its capacity and modernize its fleet. The North American truckload market is gradually becoming capacity constrained. So far in the current fiscal year, the company has completed four asset-based acquisitions and has expressed the intent to complete another one. All these acquisitions helped the company to cope with the industry’s problem of driver shortages, ensuring hassle-free customer services.

Attractive Earnings Estimate Revisions

Earnings estimates for Celadon have been rising over the last 90 days. The Zacks Consensus Estimates for fiscal 2012 and 2013 moved up 6.2% and 5.2% to $1.03 and $1.22, respectively. The current Zacks Consensus Estimate for fiscal 2012 indicates a whopping 58.5% year-over-year growth. Similarly, the current estimate for fiscal 2013 implies a year-over-year growth of 18.1%.

Valuation Looks Reasonable

Celadon currently trades at a forward P/E of 15.11x, implying a discount of over 2.5% compared with the peer group average of 15.50x. However, on a price-to-sales basis, Celadon shares currently trade at 0.61x, a 24.5% discount to the peer group average of 0.49x. The stock looks attractive given a trailing 12-month ROE of 12.4%, which is 21.6% above the peer group average.

Chart Shows Growth Potential

The chart below shows a secular positive price movement since October 2011. This uptrend should encourage investors as the stock is likely to continue its momentum on the initial sign of a turnaround in the U.S. housing sector. Truckload operators like Celadon may become major beneficiaries of this positive development.

The Company

Indianapolis, Indiana headquartered Celadon Group Inc. was founded in 1985. The company provides long-haul and regional full-truckload freight services between the U.S., Canada and Mexico. Furthermore, Celadon provides web-based B2B services, warehousing, and brokerage services.