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Celadon Group

CGI

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Celadon Group Inc. (CGI - Snapshot Report) posted a nearly 22% positive earnings surprise in the fourth quarter of fiscal 2012, lifting shares of this cross country truckload transporter by more than 20% over the past month. This marked the sixth straight quarter of outperforming the Zacks Consensus Estimate. With attractive valuation metrics, including a P/E multiple of 12.16, this Zacks #1 Rank (Strong Buy) is a compelling value pick.

A Mixed Q4

On July 30, Celadon reported mixed financial results for the fourth quarter of fiscal 2012 (ended June 30). Earnings per share of 39 cents surpassed the Zacks Consensus Estimate by 7 cents (21.9%) and the year-ago earnings by a convincing 15 cents (62.5%). Total revenue of nearly $157.5 million increased 4.2% year over year, but lagged the Zacks Consensus Estimate by 5.6%.

The year-over-year increase in both the top and the bottom line is due primarily to a 4.1% hike in rates, a decrease in overall equipment costs, and a reduction in operating and maintenance expenses. Celadon is focusing on strategic acquisitions in order to expand its capacity and modernize the fleet. The average tractor age has been brought down to 1.5 years and trailers to 2.8 years.

Strong Earnings Estimate Revisions

Earnings estimates for Celadon have been rising over the last 60 days. The Zacks Consensus Estimate for fiscal 2013 moved up 9.8% to $1.34, while the Zacks Consensus Estimate for fiscal 2014 increased 4.1% to $1.54. The current estimates indicate year-over-year gains of 19.7% for fiscal 2013 and 15% for fiscal 2014.

Impressive Valuation

Shares of Celadon have provided a fairly large return of 34.6% year-to-date, compared with the benchmark S&P 500 return of just 14.4%. Going forward, there is an untapped potential locked in the stock, evidenced by its current forward P/E multiple of 12.16, P/S multiple of 0.63 and P/B multiple of 1.91 (a P/E ratio below 15.0, a P/S ratio below 1.0, and a P/B ratio under 3.0 generally indicate value). Other positive multiples include a trailing 12-month ROE of 13.9%, compared with the industry average of 11.2%, and a current dividend yield of 0.5%.

Solid Chart

The earnings growth is reflected in the chart below. The Zacks Consensus Estimate line indicates a steep upward movement through fiscal 2015. The chart clearly shows that the stock price is expected to move much higher than the increasing estimate trend.

Celadon Group Inc. was founded in 1985 and is headquartered in Indianapolis, Indiana. 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.


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