The last time I looked at bulk transportation company Quality Distribution
Yearly sales increased 10.0%, and quarterly sales rose 11.2% to $139.4 million, a record for any fourth quarter, although the company is still losing money at the bottom line. The stock is up about 1.5% thus far today.
The good news comes at an important time for the company. Two shareholder lawsuits have been settled, the company has completed a private placement to take care of near-term financing needs, and there is a new operating management team running the day-to-day business.
The company is also restructuring by selling and outsourcing its insurance business and selling its juice business so it can focus on its core transportation business. With 3,500 tractors and 7,400 trailers, it is the largest bulk transportation company in North America.
To put its recent positive results into perspective, note that Quality sells for half its November 2003 initial public offering price. Although the IPO proceeds were used to improve the company's balance sheet by reducing debt, total debt stood at $277 million at the end of 2004. That's large relative to the company's $189 million market cap, but I'd say it's not out of line in that it's just 44.5% of 2004's $622 million in revenue.
Investors should consider what the company offers. It's the "core carrier" for the Fortune 500 companies engaged in chemical processing. Clients include Motley Fool Income Investor recommendation Dow Chemical
The two analysts who follow the company expect it to earn $1.17 in calendar year 2005. That, combined with revenue estimates, would likely place Quality's profit margin around 6%, assuming a steady share count. It's hard to know exactly how good that is given that the company's three major competitors are privately held. But it compares favorably with Quality's publicly traded peers, and equates to a modest 8.6 forward P/E.
And speaking of those publicly traded peers, a look at them -- CNF
Fool contributor W.D. Crotty does not own shares in any of the companies mentioned. Click here to see The Motley Fool's disclosure policy.