Saia (SAIA): Zacks Rank Buy

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Saia Inc. (SAIA) has delivered four straight positive earnings surprises that helped its stock price soar nearly 138% since October 2011. This multi-regional less-than-truckload (LTL) transporter has generated an average surprise of 42.1% in that time, as it has benefited from a gradual recovery in the U.S. transportation sector, higher pricing power and initiatives for industrial engineering. The strong financial performance along with high earnings growth potential makes this Zacks #1 Rank (Strong Buy) a lucrative opportunity for growth-seeking investors.

A Robust Quarter

On July 27, Saia reported second-quarter 2012 earnings per share of 72 cents, which topped the Zacks Consensus Estimate by 41.2% and year-ago earnings by an impressive 242.9%. Total operating revenue of approximately $287.5 million beat the Zacks Consensus Estimate by 0.5% and increased 8.1% year over year.

The company's strong operational efficiencies are clearly visible through several operating metrics in the recently reported quarter. Operating ratio (a key indicator for the transport sector) improved 4.3% to 92.6 from 96.9 in the year-ago quarter. Weight per LTL shipment and LTL yield increased 3.3% and 7.1% year over year, respectively.

Estimate Revisions Climbing

In the last seven days, six of seven estimates for 2012 moved higher, lifting the Zacks Consensus Estimate by over 17.3% to $1.90. This implies year-over-year profit improvement of more than 171.2%. Saia also witnessed six of seven estimates moving higher for 2013, boosting the Zacks Consensus Estimate by nearly 11.2% to $2.28. This suggests year-over-year profit improvement of 20.2%.

Attractive Valuation

Saia currently looks attractive with respect to several valuation metrics. The stock's forward P/E of 13.36x is indicating a discount of 11.5% from the peer group average of 14.89x. Similarly, Saia's current P/B of 1.60x is at a 23.1% discount to the peer group average of 1.97x. The stock looks quite attractive given its current P/S of 0.34x, implying a massive discount of 108.8% to the peer group average of 0.71x.

Solid Growth Potential

The price and consensus chart shows solid earnings growth potential as depicted by the wide gap between the estimate lines of 2011, 2012 and 2013. This uptrend should encourage investors as the stock is likely to continue with its growth riding on a strong U.S. transportation industry. Saia is investing extensively to replace its older tractors and trailers, as well as for technological improvements such as enhancing fuel efficiency. The 2012 and 2013 estimate lines are well above the stock price, indicating that Saia is currently undervalued.

Headquartered in Johns Creek, Georgia, Saia Inc. was founded in 2000. The company was formerly known as SCS Transportation Inc. Saia is a LTL transporter for regional, interregional, and guaranteed services mainly servicing the retail, petrochemical and manufacturing industries. As of June 30, 2012, the company's network covered 34 states through 152 terminals.

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