Higher truck revenue drives CNF

0 Comments | Oakland Tribune, Jan 27, 2004 | by Rip Watson, Bloomberg News

CNF Inc., owner of the largest U.S. regional trucker, said fourth- quarter net income rose 20 percent, helped by higher trucking revenue in a stronger economy.

Net income climbed to $28.9 million, or 49 cents a share, from $24.2 million, or 41 cents, the Palo Alto-based company said in a statement. Sales rose 6 percent to $1.35 billion from $1.28 billion, including a 10 percent increase at the Con-Way Transportation Services trucking unit.

Truckers, which carry two-thirds of U.S. freight according to an industry trade association, are being helped a U.S. economy that has been showing signs of growth in the fourth quarter and for 2004. Consumer confidence in a University of Michigan survey reached a three-year high this month as unemployment claims fell and industrial production rose for the fourth consecutive month.

"This was a plain vanilla quarter," said Geoffrey Rosenberger, a portfolio manager at Clover Capital Management, which held 158,000 CNF shares as of Sept. 30. "There aren't any big surprises here."

The Con-Way unit's profit before interest and taxes rose 58 percent to $58 million in the quarter on the sales gain to $577.5 million. CNF's Menlo Worldwide unit, which manages cargo shipments for customers, had a $2.6 million loss before interest and taxes, in- cluding costs of $7.8 million to restructure its air- freight business. Menlo sales rose 3.2 percent to $777.2 million.

"The cyclical recovery at Con-Way seems to progressing nicely," Rosenberger said. "Menlo still seems to stuck in the mud. For the stock to go higher, they have to get Menlo turned around."

Con-Way "is continuing to take market share from competitors and maintain discipline in pricing," said Robert W Baird & Co. analyst Jon Langenfeld, who rates the shares "neutral" and doesn't own them. "This is a contrast to companies such as Arkansas Best, which today reported soft tonnage."

Arkansas Best, based in Fort Smith, Ark., said Monday fourth- quarter tonnage fell 2.3 percent while costs rose 3 percent. The news helped send the company's shares down 10 percent, the biggest one- day drop in nine months.

CNF forecast first-quarter earnings per share of 29 cents to 37 cents. The company's net income in 2003's first quarter was $17.96 million, or 30 cents.

"We expect a seasonally weak first quarter for domestic air freight," Langenfeld said. "We could see a continued pattern from previous years where there are significant losses in that quarter."

The operating loss for the air-freight business was $12.7 million in last year's first quarter and $15.6 million in 2002, he said.

During the fourth quarter, freight tons per day at the Con-Way trucking unit rose 9.4 percent, CNF said in a statement. Menlo's sales increase was helped by a 12 percent rise in international air- freight revenue, the company said. Menlo's domestic air-freight revenue dipped 6.8 percent, and sales at the unit's business that arranges shipments for other companies declined 1.2 percent.

The restructuring costs at Menlo were for jobs cuts and expenses such as lease cancellations in cities like Los Angeles where facilities were consolidated, CNF spokeswoman Nancy Colvert said.

The company's per-share profit matched the average analyst estimate in a Thomson Financial survey. CNF shares fell 14 cents to $35.48 at 4:15 p.m. in New York Stock Exchange composite trading. The results were announced after the close of trading.

Full-year net income fell 9.6 percent to $92 million, or $1.57 a share, from $101.8 million, or $1.74, in 2002. Sales rose 7.2 percent to $5.1 billion from $4.76 billion.