Con-Way Inc. (NYSE:CNW) -- Falls Short of Earnings Estimates

Con-way Inc. (NYSE:CNW), the San Mateo, California-based provider of transportation, logistics, and supply-chain management services, recently missed consensus earnings estimates. Dan Amoss, Agora Financial’s editor of the Strategic Short Report, shows how the small miss could still be an important chink in the armor of CNW investor confidence.

From Amoss’ most recent reader update:

“Con-way Inc. (NYSE:CNW) missed earnings estimates by a few pennies. More importantly, management’s dour outlook finally spooked shareholders. ‘Yield each month in the quarter improved sequentially,’ says CEO Doug Stotlar. ‘However, managing the balance between price and volume while bringing costs into alignment will take time, which restrains our expectations for near-term improvement.’ Here is a chart of CNW since March 2010:

“On the conference call, a few analysts asked how the broad economy affects pricing and volumes. While management said pricing is a very company-specific issue, it admitted trucking demand might very well be slowing. Tonnage was down 3.3% sequentially from June to July. This compares to a 1%-3% sequential June/July decline in a typical year.

“Based on management’s views, it’s likely that 2010 earnings estimates will come down substantially. Our thesis — that management is stuck with too much unprofitable freight, and customers will defect if prices are hiked too much — is playing out. CNW stock can go much lower from here in the coming months.

“CNW shareholders are finally questioning why they own this stock at 30 times 2010 earnings, especially when odds of accelerating earnings growth are eroding.

“Capacity in LTL trucking remains too loose to allow Con-way respectable profit margins. And now that the economy is off its April/May peak, pricing and volumes could keep softening.”

Dan Amoss sees the broader stock market as overbought, especially given today’s rapidly slowing economy and the recent ugly initial jobless claims. If these data points manage to restore more rational expectations about future corporate earnings, then Amoss expects analysts to bring consensus numbers for CNW down from $1.10 for 2010 and $2.11 for 2011.

To receive Amoss’ specific trading recommendations for Con-way, you’ll have to subscribe to the Strategic Short Report. It’s available through the Agora Financial reports page, found here.


Rocky Vega,
The Daily Reckoning

[Nothing in this post should be considered personalized investment advice. Agora Financial employees do not receive any type of compensation from companies covered. Investment decisions should be made in consultation with a financial advisor and only after reviewing relevant financial statements.]

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