Con-way a Trucking Business Turnaround

Con-way (CNW) is a trucking transportation provider that has started on a turnaround around after slipping into reverse in 2009 and idling in 2010.

The Ann Arbor, Mich., company remains vulnerable to economic volatility, though. It is a provider of ground transportation, logistics services and supply-chain support to companies in such industries as manufacturing and retailing. The company provides logistics services for freight shippers through its subsidiary Menlo Worldwide Logistics.

Con-way reported net income of $65.4 million for the first nine months of 2011, compared to just $1.5 million during the same period in 2010. The company incurred goodwill impairment and other pre-tax charges totaling $21.9 million in the 2010 period.

Revenue in the nine months ended Sept. 30 rose to $3.97 billion, up 6.2 percent from the same period in 2010. Most of the revenue comes from Con-way's freight business, which handles less-than-truckload shipments of between 100 pounds and 15,000 pounds.

Wall Street's view of Con-way the company is split between fast-lane enthusiasm and middle-of-the-road neutrality. About half of the investment analysts following the company in early January had a buy rating on its stock and about half recommended holding it.

John G. Larkin, a managing director of investment firm Stifel, Nicolas & Co., recently reiterated a buy rating on Con-way stock, citing firmer pricing by the company's less-than-truckload freight transportation operation, its largest business segment.

Aggressive actions

Con-way's freight operation "appears to have learned its lesson from the aggressive pricing actions in 2009-2010 and is now appropriately focused not just on pricing but network balance and freight selection," Larkin and four other Stifel analysts wrote in report this month on the transportation and logistics industry. "Service has also improved significantly, which should give justification to rate increases."

Some income-oriented investors hold Con-way stock because of the company's quarterly cash dividend of 10 cents, which it has been paying for years. Larkin and his colleagues reported Jan. 9 that the 1.3 percent dividend yield on Con-way stock was higher than the yields on two comparable dividend-paying stocks, 0.8 percent on Forward Air (FRWD) and 0.6 percent on Arkansas Best (ABFS).

In September, credit rating agency Standard & Poor's changed its outlook for Con-way to stable from negative and credited the company's improved operating results. S&P analysts Anita Ogbara and Funmi Afonja reported Sept. 8 that "the stable outlook reflects our expectation that credit measures will continue to improve in response to pricing initiatives, margin improvement and gradually increasing freight demand."

Con-way next reports on Feb. 2.