Swift Transportation (SWFT), the largest U.S. truckload carrier, is attractive on a valuation basis, trading below expectations for its peer group, as the Street hasn’t yet valued corporate culture improvements and senior-management talent acquisitions, says John G. Larkin, CFA, Analyst at Stifel, Nicolaus & Co., Inc.
“Just to give you a flavor for how cheap that stock looks to us right at the moment, the stock is currently trading at about 8.7 times our 2012 earnings estimate. More typically, truckload carriers are trading in low- to mid-double digit — i.e., low-to mid-teens — multiples,” Larkin said.
Larkin says SWFT‘s CEO, Jerry Moyes, has worked to resolve transportation problems for big box retailers like Wal-Mart (WMT), Lowe’s (LOW), Sears (SHLD) and K-Mart, and he is a well-liked by the company’s customers. Moreover, talent acquisitions have resulted in more profitability for Swift.
“On the operating side, the company has evolved by elevating a fellow by the name of Richard Stocking to the role of Chief Operating Officer. He has put in a lot of what I would call quantitative measurement into the corporate culture. Just about everybody measures, literally, everything that can be measured on a periodic basis to see how each person is advancing in terms of meeting their annual quantitative objectives, whatever it might be — cost within the maintenance shop, productivity on the dispatch floor or safety performance out on the highway. They track all of it and track it rigorously,” Larkin said.
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