Bear of the Day: Swift Transportation (SWFT)
Swift Transportation (SWFT) is now a Zacks Rank #5 (Sell) after the company reported earnings earlier this last week and rallied the stock 20%. The rally was very impressive; a move long overdue, after the stock has fallen over 50% over the last year. But recent estimates are coming down, causing investors to move money out and even short the stock.
Swift is a multi-faceted transportation company that engages in providing truckload carrier services in North America. The Phoenix based company operates through four segments: Truckload, Dedicated, Central Refrigerated, and Intermodal.
Earnings
Earnings came in at $0.53 versus the $0.47 expected with revenues coming in below the $1.11 Billion, at $1.09 Billion. Guidance for FY 2016 came in at $1.50-1.60 versus the 1.54 expected. An important note, the company mentioned on the call that share buybacks may be the most viable option for returning money to shareholders.
The Earnings Move
Investors ate it up and the stock pushed higher, cutting into last year’s losses. However, the violent move was a combination of a stock moving down too far and a large short interest. There are around 27 million shares, or 30% of the float, short at the moment. It should be expected, that weak hands get shaken out after a mild report like this.
Estimate Revisions
Agreement among analyst on estimate revisions is overwhelmingly to the downside. Analysts have revised down eighteen times for the current fiscal year 2016, including one over the last seven days. This tells us the most recent earnings were uninspiring and forced an analyst to revise lower. Consensus estimates during the same period have gone from $1.63 to $1.56, a drop of 4.4%.
A Better Option
The trucking industry is ranked 252 out of 265 of the Zacks Indutrsy Rank, the bottom 5%. There aren’t a lot of solid options in transportation, but rail might provide a better opportunity.
USD Partners(USDP) is a Zacks Rank #2 (BUY) that develops and operates energy-related rail terminals and other and complementary midstream infrastructure assets and businesses. The company is a value play with a Style Score of “A” in Value.
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