Stifel Upgrades Saia After Sell-Off, Says Freight Carrier Benefits From Better Volumes, Higher Pricing

Stifel turned bullish on the trucking company Saia Inc SAIA after a forecast-beating first-quarter print.

The Analyst

Stifel's David Ross upgraded Saia from Hold to Buy and lowered the price target from $83 to $78.

The Thesis

Saia's tonnage grew a strong 12.2 percent year-over-year in Q1, Ross said in a Monday note. The analyst expects double-digit growth in tonnage for at least the next two quarters before tougher comps appear in the fourth quarter.

Saia is growing yields faster than competition, although its margins are still not as good on a sustainable basis, Ross said. The yields reflect a strong pricing environment, he said.

The company is benefiting from better volumes and higher pricing thanks to strong economic momentum and capacity constraints around drivers, the analyst said.

Ross expects margins to continue to improve, but said continued expansion in the Northeast could hurt to some extent.

Shrugging off comparisons with Old Dominion Freight Line ODFL, Ross said: "Saia has progressed a little better than peers but not along the same trajectory as Old Dominion."

That story line "less about Saia and more about how remarkable Old Dominion has been as an operator, getting and then extending its lead over the competition for the last decade," he said.

With the stock pulling back about 13 percent in a little over a week, the analyst said "the shares are now worth taking a look."'

Stifel's estimates are well above Street estimates for the next year.