Forward Air Earnings: Here’s Why Investors are Not Excited Now

Forward Air Corp. (NASDAQ:FWRD) delivered a profit and missed Wall Street’s expectations, AND came up short on beating the revenue expectation. The revenue miss is a negative sign to shareholders seeking high growth out of the company. Shares are up 0.02%.

Forward Air Corp. Earnings Cheat Sheet

Results: Adjusted Earnings Per Share decreased 6.25% to $0.45 in the quarter versus EPS of $0.48 in the year-earlier quarter.

Revenue: Rose 7.73% to $159.8 million from the year-earlier quarter.

Actual vs. Wall St. Expectations: Forward Air Corp. reported adjusted EPS income of $0.45 per share. By that measure, the company missed the mean analyst estimate of $0.53. It missed the average revenue estimate of $169.09 million.

Quoting Management: Bruce A. Campbell, Chairman, President, and CEO, commenting on the second quarter said, “Within our Forward Air, Inc. business segment, the overall tepid macroeconomic environment, the loss of a large customer which created a tough prior year comparison and our continued pricing challenges all conspired to make for a difficult second quarter. Fortunately, we believe that each of these headwinds will be short-lived. With respect to the macroeconomic environment, we have been experiencing increased network volumes. While a few weeks don’t equate to a trend, we are hopeful that it is a positive sign for an improved freight environment. As for the customer loss creating a difficult year-over-year comparison, the third quarter will mark the last full quarter where this is an issue as the former customer exited our services during the fourth quarter of last year. Lastly, we believe the irrational pricing behavior of some of our competitors is not financially sustainable. Those who maintained pricing discipline will ultimately be rewarded.”

Turning to the Forward Air Solutions business segment, Mr. Campbell said, “We mentioned on our first quarter call that Solutions was bringing on our second large customer for 2013. While this did in fact happen, and while most of our effected locations handled this well, three of our terminals struggled with the integration. This resulted in a small loss for the quarter and we are in the process of addressing those challenged locations.”

Commenting on the first full quarter of our newly acquired Total Quality, Inc. (TQI) business segment, Mr. Campbell said, “Our team continued to make substantial progress integrating TQI. We improved our operating margins each month and ended the quarter with a 92.7% operating ratio for June. We believe that our continued integration initiatives, including, most notably, a new operating system due to be online in early fourth quarter, along with a robust new business pipeline should get us to a sub-90 operating ratio in fairly short order.”

In closing, Mr. Campbell said, “As always, I would like to thank the Forward Air team of employees and independent contractors for their dedication and hard work. Their superlative efforts differentiate us from others in the industry.”

Key Stats (on next page)…

Revenue increased 12.88% from $141.56 million in the previous quarter. EPS increased 25% from $0.36 in the previous quarter.

Looking Forward: Analysts have a more positive outlook for the company’s next-quarter performance. Over the past three months, the average estimate for next quarter’s earnings has risen from a profit of $0.51 to a profit $0.52. For the current year, the average estimate has moved down from a profit of $2.03 to a profit of $2 over the last ninety days.

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(Company fundamentals provided by Xignite Financials. Email any earnings discrepancies to earnings [at] wallstcheatsheet.com)

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