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Why Echo Global Logistics, Inc.'s Shares Popped 32% Today

By Travis Hoium - Updated Oct 26, 2017 at 1:18PM

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A big earnings beat is pushing this logistics stock higher.

What happened 

Shares of supply chain management company Echo Global Logistics, Inc. (ECHO) jumped as much as 32.4% in trading Thursday after the company reported third-quarter results that easily topped expectations. The early pop gave way quickly, but shares were still up 19% at 1:50 p.m. EDT. 

So what

Total revenue jumped 10.7% to $509.5 million, and net revenue was up 7.2% to $86.7 million. Net income was up 1.3% to $2.4 million, or $0.27 per share on a non-GAAP basis, and non-GAAP EBITDA was up 0.5% to $16.8 million. Analysts were only expecting $0.20 per share in earnings on $472.9 million of total revenue, so it was a resounding earnings beat. 

Truck driving down the highway at sunset.

Image source: Getty Images.

Management also increased full-year total revenue guidance to $1.855 billion-$1.895 billion, easily topping the $1.8 billion analysts were expecting. 

Now what

The transportation business is an inherently low-margin one, so the increase in revenue will be highly leveraged to the bottom line as a logistics company like Echo Global utilizes its existing operating base. That's both the risk and upside of the business model, and in Q3 2017 it worked in investors' favor. Given the low GAAP net income growth of 1.3% in the quarter, this isn't a stock pop I'm going to jump on, but if management can keep growth going the stock could continue to march higher. 

Travis Hoium has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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