Trucking company Saia(NASDAQ: SAIA) fell short of expectations in the second quarter, weighed down by expansion costs. Investors were caught off guard, sending shares of Saia down 18% as of 11:30 a.m. ET.
A quarterly miss
Saia is one of the nation's largest less-than-truckload (LTL) trucking companies, a portion of the market focused on hauling loads for multiple customers on a single truck. The company earned $3.83 per share in the second quarter on revenue of $823.2 million, falling short of Wall Street's consensus estimate for $4 per share on sales of $827 million.
It has been a tough period for trucking companies, as fears about the economy have depressed inventories and softened demand for transport services. But Saia's results mostly point to an improving environment: Revenue was up 18.5% year over year, shipments per workday increased by 18.1%, and operating income improved by 14.4%.
The 2023 failure of rival Yellow Corp. both helped with pricing power in the industry and provided Saia with added terminals. CEO Fritz Holzgrefe noted in a statement that expansion does not come cheap, which might explain the earnings miss, but said Saia remains on the right road.
"Successfully opening and relocating terminals required investments in employee hiring, training and other costs that come in advance of opening and revenue generation," Holzgrefe said. "Disruptions in the LTL market that commenced in 2023 and our continued long-term investments in our network have resulted in share gains, including in some markets that we traditionally have not participated in, introducing both new challenges and opportunities."
Is Saia stock a buy after its earnings miss?
Investors never like to see an earnings miss, but this move looks like an overreaction. Saia is investing in its business, and the near-term pain of lower earnings today should yield better results in the quarters to come.
There are still questions about the health of the economy, and uncertainty about when demand and pricing power will improve. It might take time for Saia to get to its destination, but even after the decline the company appears to be on the right road.
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Lou Whiteman 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.
