Jodi Mitchell may have been on to
something with her 1970 hit Big Yellow Taxi.
If you remember the chorus, “They paved paradise to put up a parking lot.” Well, parking lots have sprung up all over
the U.S. over the years (often on sites of demolished buildings or open spaces)
and are a necessity in our modern mobile world and the over 250 million
registered vehicles now filling U.S. roads.
Operating them efficiently and
profitably may be another song (and feat) all together.
Standard Parking (STAN) is one of
the largest parking companies in the States.
Since merging with Central Parking in 2012, Standard now operates more
than 4,200 facilities with more than 2.2 million parking spaces in hundreds of
cities across North America.
Their business also includes
parking-related and shuttle bus operations serving more than 75 airports. USA
Parking System, a wholly-owned subsidiary of Central Parking, is one of the
premier valet operators in the nation with more four and five diamond luxury
properties, including hotels and resorts, than any other valet competitor.
As much as this seems positive, future
growth comes with its share of hurdles due to real estate costs and other
factors. Improvements in infrastructure
and public transportations will also put pressure on earnings expansion.
Let’s not forget that consumers are
also still strained and now many of us are making less money with recent tax
hikes and many are getting smarter with their commuting choices and/or working
from home. All of these factors among
others may be serious stumbling blocks for professional parking companies like
STAN, which operates a tight ship as it is.
Operating a national parking entity
is not only a complex business, but it often comes with tight margins.
In fact, gross profit margin for Standard
Parking is extremely low at 8.90%. It has decreased from the same quarter in
2012 according to their last earnings report and their most recent net profit
margin reading of -1.27% seriously trails that of the industry average (special
items threw them into the negative for the quarter).
STAN recently reported a significant increase
in overall revenue (196.7 million versus expectations for 222 million) when
compared with the same quarter a year prior, but non-GAAP earnings per share
dropped significantly and GAAP earnings per share shrank to a loss (they
included charges from the central parking acquisition).
The bottom line is that their 26
cent per share missed the Zacks Consensus Estimate of 27 cents; Standard
Parking also missed Q3 2012 estimates as well by almost 15%.
While the company did guide between
75 and 85 cents for FY 2013 earnings, there still may be headwinds for shares
to rally from here. The company has
reported a trend of declining earnings per share over the past two years and seems
to be on the wrong end of the EPS growth curve.
The potential is there, just not now
Once Standard Parking absorbs and
integrates Central Parking into their normal operations, we should see earnings
stabilize. While analysts’’ outlooks aren’t
so rosy for the coming quarters, 2014 may be the year the company gets back on
It’s not that easy to raise parking prices
on already strained consumers…
In the meantime, it might be best to
seek out better alternatives and look at some strong REITs for yield such as Starwood
Properties (STWD - Snapshot Report)