Laidlaw (NYSE:LI) is ready to go Greyhound, and leave the health care to someone else. (I'll explain in a moment.) The company reports fiscal Q2 2006 earnings tomorrow after the market closes.
What analysts say:
- Buy, sell, or waffle? Only three analysts follow Laidlaw, with one voting buy and two saying "hold."
- Revenues. Sales are only expected to rise 2% in comparison to last year, to $776.3 million.
- Earnings. Profits, however, are predicted to nearly double, to $0.39 per share.
What management says:
Laidlaw recently exited the health-care sphere. Today, it concentrates on transportation, including school buses for children and Greyhound buses for everyone else. According to a recently released investor presentation, the company now aims to concentrate on improving its remaining transportation businesses. It wants to expand margins by 300 to 400 basis points by rationalizing its Greyhound network, maximizing prices, and targeting the key demographic groups likely to ride buses. Let's see how it's been doing on this so far.
What management does:
So far, so good, it seems. Although gross margins have been falling for four quarters, they're still at the same level they occupied 18 months ago, so no long-term harm was the cause. Meanwhile, sales were up in each of the last two quarters, yet selling, general, and administrative costs were down -- and the company's debt repayments have interest costs falling as well. Due to these, and the proceeds from the sale of the health-care transportation services -- see the "income from discontinued operations" line in the company's recent income statements -- operating profitability today is 38% higher than it was a year and a half ago.
|
Margins % |
8/04 |
11/04 |
2/05 |
5/05 |
8/05 |
11/05 |
|---|---|---|---|---|---|---|
|
Gross |
74 |
75.9 |
76.5 |
76.5 |
74.3 |
74 |
|
Op. |
4.7 |
4.9 |
6 |
5.6 |
5.4 |
6.5 |
|
Net |
2 |
2.3 |
9.9 |
9.7 |
7 |
7.9 |
One Fool says:
Trading at a trailing P/E of 12, but with analysts projecting 14% profit growth per annum over the next five years, Laidlaw looks like a pretty decent investment at today's prices. And the stock's dividend yields a market-beating 2.2%, to boot.
So far, this company's turnaround looks pretty successful. If it can achieve the further goals it has set for itself, the company's tightened focus on buses could well make this a profitable investment for long-term owners.
Competitors:
Each of Laidlaw's primary competitors is a subsidiary of various U.K.-based entities. None of the U.K. parent companies' shares are listed on U.S. exchanges.
Fool contributor Rich Smith does not own shares of any company named above.
