UPDATE: BB&T Capital Cuts Roadrunner Transportation (RRTS) to 'Underweight'
BB&T Capital downgraded Roadrunner Transportation (NYSE: RRTS) from Hold to Underweight. The change follows the release of Q1 results. Analyst Thomas S. Albrechtsiad said while new guidance doesn't sound so bad, first quarter performance means that there must be a "significant ramp up in performance from Q2'16 onward."
"First, we have a low level of confidence in the company's guidance ... Second, even if EPS and EBITDA end up in their new guidance ranges, we believe the stock will continue to see multiple compression due to its inconsistent operating history and financial leverage. Thus while the stock may be close to finding a bottom, we do not see any catalysts that would cause a material rally in the stock any time soon. Our rating change also reflects our current belief that it could take all of calendar 2016 to work off excess trucking and intermodal capacity, which is in contrast to the "improving second half" narrative we hear from many companies," said Albrechtsiad.
"Current operating EPS guidance (excluding $0.10 of downsizing costs, $0.05 each in both Q1 and Q2) is $1.10 to $1.25 compared to $1.30 to $1.45 previously. RRTS did $0.08 of GAAP EPS in Q1'16 and $0.13 of operating EPS versus $0.35 in Q1'15. To get to the low end of its operating EPS it needs to average $0.32 to $0.33 in EPS the next three quarters. But management suggested that the improvement would be more in 2H, which we believe means EPS might need to be $0.35 to $0.40 in Q3 and Q4. While this was attained in selected quarters the last two years, the macro freight and pricing environment was much stronger," added the analyst.
For an analyst ratings summary and ratings history on Roadrunner Transportation click here. For more ratings news on Roadrunner Transportation click here.
Shares of Roadrunner Transportation closed at $10.27 yesterday.