When we last checked in with Laidlaw International
This quarter's numbers brought a much different reaction, sending the stock up 16% on Friday. The firm, parent to Greyhound and operator of thousands of the nation's yellow school buses, is fresh from its bankruptcy turnaround, meaning we need to be careful when making those comparisons to last year's results.
Revenues inched up 3% to $1.2 billion, and though the release claims ambulance services provided the strength, a couple minutes with the calculator shows that emergency management services (up 12%) and public transportation services (up 8%) posted the best percentage and incremental gains. That's kind of a drag, because those two segments also happened to have the crummiest margins this quarter, far behind the school bus business.
Still, the final tally on the bottom line was $0.33 per share. What happens to that profit is what investors need to consider. Laidlaw still carries $1.2 billion in debt and only $161 million in cash. Net cash provided by operations so far this year is $281 million, but buses don't come cheap, meaning capital expenditures eat up a lot of that cash -- $151 million so far.
Management looks for this year's top line to expand 3% to 4% total and earnings (before all those unpleasant interest payments, taxes, depreciation, and so forth) to increase 7% to 8%. That's not exactly compelling growth. Priced at 33 times this year's estimates, Laidlaw doesn't exactly look cheap, either.
With next quarter predicted to end up in the red, total annual capital expenditures expected to be $250 million, and all that debt to service, it makes sense for investors to sit tight for a while and look for another ride to easy street.
Tom Gardner looks for underappreciated companies with growing earnings and free cash flow and presents them each month in Hidden Gems .
Fool contributor Seth Jayson enjoys taking a look at neighborhood companies -- he lives not far from Laidlaw's Naperville offices, but he has no position in any firm mentioned. View his Fool profile here.
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