FWRD Beats, Yearly EPS Flies Higher

Forward Air Corp. ( FWRD - Snapshot Report ) reported fourth quarter 2010 net earnings per diluted share of 41 cents, surpassing the Zacks Consensus Estimate of 37 cents. The EPS also soared 86.4% from the prior-year quarter and 31.3% from last quarter.

For full year 2010, net earnings per share escalated 223.5% from year-end 2009 to $1.10 per share. However, it failed to beat the Zacks Consensus Estimate of $1.07 per share. Income from operations, net income and the net earnings per diluted share included the impact of $7.2 million pre-tax charge for the impairment of goodwill and other intangible assets.

Company stated that the solid demand for airport-to-airport service combined with the strong pricing drove the strong results for the quarter. Management appreciated the continued positive leverage of the business model which helped turn a 370 basis point improvement on an yearly basis.

Quarter and Year: Performance

Operating revenue increased 13.0% from the previous year quarter to $133.3 million but fell just marginally short of the Zacks Consensus Revenue Estimate of $134.0 million.

Full-year revenue increased 15.9% from last year to $483.9 million and was negligibly short of the Zacks Consensus Revenue Estimate of $484.0 million.

Management was particularly elated with the fourth quarter performance of Forward Air Solutions segment, which generated $22.5 million of revenue. Management expects the segment to earn profits for the company in 2011 given the improvement of the economy and on-going cost control initiatives.

The company, with an operating ratio of 86.0% recorded its best performance since the third quarter of 2008. Net margin for the quarter was 8.9% and increased 3.6 percentage points from prior year quarter.

The company ended 2010 with cash of $74.5 million after a strong free cash flow of $40.1 million that allowed Forward Air to increase the cash by $32.5 million. Cash at the end of 2009 was $42.0 million.

The Board of Directors declared a quarterly cash dividend of 7 cents per share of common stock, on February 11, 2011, and is expected to be paid on May 28, 2011 to shareholders of record at the close of business on March 13, 2011.

The Forward March

Management expects the improving macroeconomic trend and the trend which is specific to the company to continue throughout 2011. Management plans to utilize employees and independent contractors to take advantage of the improving situation and get the maximum value to shareholders.

Revenue in the next quarter is expected to increase in the range of 9%-13% compared with the same period of 2010. Zacks Consensus Revenue Estimate is projected at $121.0 million for the first quarter 2011. Management expects the earnings per diluted share to be in the range of 20 cents to 24 cents per share. For next quarter, Zacks Consensus Estimate is 23 cents per share.

Conclusion

Estimates for the quarter had been stable in the run-up to the earnings release with no analysts revising estimates either way over the past month. The full-year estimate for next year has moved up by a cent to $1.35 per share in the last 7 days, though no analysts revised the estimates.

Peers for the company include, Quality Distribution Inc. ( QLTY - Snapshot Report ) and Arkansas Best Corporation ( ABFS - Snapshot Report ) among others.

We currently have a Zacks #4 Rank for Forward Air on short term basis, which translates into a Sell rating. On long-term we have a Neutral recommendation.