July 29, 2010 / 11:24 AM / 7 years ago

UPDATE 3-TransForce Q2 beats, sees stable pricing; shares rise

* Q2 adj EPS C$0.24 vs est. C$0.18

* Q2 EPS C$0.18 vs C$0.21 year ago

* Revenue up 9 percent

* Sees pricing pressure easing in 2010

* Shares up 13 percent (Adds analyst comments, updates share movement)

By Gowri Jayakumar

BANGALORE, July 29 (Reuters) - Canadian cross-border trucker TransForce Inc TFI.TO said pricing was stabilizing in its core truckload segment, after nearly two years of weakness, sending its shares up 13 percent.

The company, which reported a quarterly profit that beat estimates on cost cuts, is also “confident that the quality of its revenues will improve within the next 12 months.”

Stabilizing conditions and cost reductions are driving a recovery in volumes and pricing for the company, which mainly operates in the less-than-truckload and truckload segments, BMO Capital analyst Jason Granger said.

The truckload segment gained from better utilization of equipment in the quarter, and pricing is expected to remain neutral for the rest of the year and improve next year, Chief Executive Alain Bedard said in a conference call.

The segment, which accounts for about a third of revenue, is mainly driven by cross-border trade, which analysts expect will spur a recovery among Canadian truckers. [ID:nSGE66E0KS]

TransForce, however, said pricing in the less-than-truckload segment would show signs of improving only next year.

Analyst Granger was nonetheless encouraged by the company’s commentary on less-than-truckload pricing, as there were finally signs of stability for the segment, which was the worst hit by the recession.

“(Pricing conditions) bode well for truckload, but has some positive indication for less-than-truckload as well,” said Granger, who has an “outperform” rating on the stock.

TransForce’s results point to a stronger freight market, in line with major transportation peers and industry indicators, analyst Benoit Poirier of Desjardins Securities wrote in a note.

Last week, rival Vitran Corp Inc VTN.TO said it expects its less-than-truckload to continue improving. [ID:nSGE66L0KE]

TransForce shares, which have gained about 12 percent year-to-date, were up 13 percent at C$10.57 in afternoon trade on the Toronto Stock Exchange.

STRONG Q2

Montreal, Quebec-based TransForce posted second-quarter earnings of C$17.1 million ($16.47 million), or 18 Canadian cents a share, compared with C$18 million, or 21 Canadian cents a share, a year ago.

On an adjusted basis, it earned 24 Canadian cents a share, beating analysts’ estimates of 18 Canadian cents a share, according to Thomson Reuters I/B/E/S.

Revenue rose 9 percent at C$496.9 million, slightly ahead of analysts expectations of C$495.2 million.

The truckload segment rose 3 percent in the quarter, while its package and courier services revenue jumped 38 percent on the back of an acquisition last November.

The company’s energy sector, which serves the oilsands and related industries, showed signs of increased activity in Canada and it expects pricing to improve from now on.

“An interesting thing about TransForce is their diversity by service line, and that has reduced their earnings volatility relative to their sector,” said Granger. ($1=1.038 Canadian Dollar) (Reporting by Gowri Jayakumar in Bangalore; Editing by Vyas Mohan, Roshni Menon)

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