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Celadon Group

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Celadon Group Inc. (CGI) has now put together 7 straight quarters of positive earnings surprises with an average beat of 18%. Earnings estimates for this cross country truckload transporter have advanced since its latest report in October, helping CGI become a Zacks #1 Rank (Strong Buy) stock on December 1, 2012.

A Mixed Quarter

On October 23, Celadon reported fiscal first quarter earnings per share of 36 cents, surpassing the Zacks Consensus Estimate by 2.8% and the year-ago earnings by 50.9%. Total revenue of nearly $153.3 million increased 6.5% year over year, but lagged the Zacks Consensus Estimate by 4.5%.

Celadon saw improved margins across the board during the quarter. Gross margin was 23.3%, reflecting an improvement of 8% over the prior-year quarter. Operating margin was up nearly 2.6% to 9.9%, while net margin jumped 160% to 5.4%. Operating ratio (a key metric in the trucking industry), which represents operating expenses as a percent of revenue excluding fuel surcharge, was 87.6%, compared to 90.9% in the year-ago quarter.

Strong Earnings Estimate Revisions

Earnings estimates for Celadon have been rising over the past 60 days. The Zacks Consensus Estimates for fiscal 2013 and 2014 each moved up 5.3% to $1.39 and $1.60, respectively. The current Zacks Consensus Estimates indicate year-over-year gains of 24.1% for fiscal 2013 and 15.3% for fiscal 2014.

Impressive Valuation

Celadon currently trades at a forward P/E of 12.30x, indicating a discount of 12.6% from the peer group average of 14.08x. With respect to the forward P/S metric, the stock is currently trading at 0.60x, a 7.7% discount to the peer group average of 0.65x. Celadon looks quite attractive given its trailing 12-month ROE of 14.8%, which is 32.1% higher than the peer group average of 11.2%.

The share price of Celadon has provided a fairly large return of 40.8% year-to-date, compared with the benchmark S&P 500 return of just 10.2%. Furthermore, consensus earnings estimates are on a steep upward movement through fiscal 2015.

Celadon Group Inc. 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. Celadon currently has a market capital of approximately $381.4 million.

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