Piper Jaffray Raises Price Target on Forward Air (FWRD)

Piper Jaffray is out with an analyst note this morning, where it reiterates its Neutral rating on shares of Forward Air FWRD; it also raised its price target on the stock to $34.00, from $31.00. The PJ analysts said, “FWRD reported 2Q10 EPS of $0.27 (vs. $0.10 a year ago) which compared to consensus $0.24 and our $0.22 estimate. Upside to our estimate resulted from better than expected tonnage and price driving a significant amount of operating leverage (FWRD reported 50% incremental margins in core Airport to Airport operations during 2Q10). On the negative Pool Distribution lost $700K during 2Q10 below our modest operating loss estimate despite what was generally a very strong Freight environment. Mgmt mid point 3Q10 introduced guidance of $0.30 is 15% above consensus prior to the 2Q10 report and seems somewhat conservative when combining FWRD's revenue guide (+20%-25% y-o-y) with incremental margins.” They added, “Core operations look strong however FWRD's newish Pool Distribution operations missed our modest slight operating loss estimate for 2Q10. We would have thought 2Q10's stronger than anticipated Freight environment would have driven profitability. We have continued concerns over the longer term model performance, which could be a drag on future valuation.” The analysts further noted, “FWRD's high end valuation likely compresses further as earnings normalize (we've adjusted our target multiple from 26x to 24x). While EPS estimates likely continue to rise on the strength of core operations we remain concerned with FWRD's commitment (and likely future capital contribution) to Pool which at this time remains unprofitable and likely carries with it lower financial returns.”