Keep On Truckin' With Wabash

| About: Wabash National (WNC)

Summary

$3 a share in cash.

15% short position.

Outperforms Its Peers.

As a kid I loved trucks. Tonka (showing my age) and come holiday time, yep the Hess trucks are back!! However I find the industry completely criminal in that there is no negotiating rates, or fuel charges. Demurrage and forced majeure blah blah blah. This article isn't about JB Hunt or Old Dominion, its about Wabash National Corp, the company that makes all the trailers, and flat beds and specialty intermodal equipment for the trucking industry.

Wabash National Corporation (WNC $12.85) designs, manufactures, and markets truck and tank trailers, intermodal equipment, and transportation related products in North America. Its Commercial Trailer Products segment provides dry van trailers; platform trailers; refrigerated trailers; specialty products, such as converter dollies, big tire haulers, steel coil haulers, and road railer trailers; aftermarket parts and rail components; truck bodies; used trailers; and laminated hard wood oak products. The company s Diversified Products segment offers transportation products, including stainless steel and aluminum liquid and dry bulk tank trailers and other liquid transport solutions for the dairy, food and beverage, chemical, environmental, petroleum, and refined fuel industries; aircraft refuelers and hydrant dispensers for in-to-plane fueling companies, airlines, freight distribution companies, and fuel marketers; military grade refueling and water tankers; truck mounted tanks for fuel delivery; and vacuum tankers. This segment also provides engineered products comprising products for storage, mixing, and blending, including process vessels, as well as round horizontal and vertical storage silo tanks; containment and isolation systems for the pharmaceutical, chemical, and nuclear industries; containment systems for the pharmaceutical, chemical, and biotech markets; and mobile water storage tanks used in the oil and gas industry. The Retail segment operates 15 owned retail branch locations, which sell new and used trailers, aftermarket parts, and services. The company offers its products under the Wabash, Wabash National, DuraPlate, DuraPlate HD, DuraPlate XD-35, DuraPlate AeroSkirt, ArcticLite, RoadRailer, TrustLock Plus, Transcraft, Benson, Walker Transport, Walker Engineered Products, Brenner Tank, Garsite, Progress Tank, Bulk Tank International, Extract Technology, and Beall brand names.

What I like about this company is that their products are sold over a litany of industries as stated above. They revenues/earnings are not dependent on 2 or 3, it is broad based. The trucking industry is on pace to grow exponentially through 2022 as shown in this very informative article.

I like the last part of the article which states:

Expect to see more trucking companies launch expansions in the form of an increase in their truck fleet and/or the addition of new trucks. Many of these new trucks will be the Class 8 trucks as projections expect their numbers to increase to 3.98 million by 2026 from 3.56 million in 2015. More trucking industry capital will be poured into recruiting high-quality drivers to meet the demands that the next year will put on these companies. While there is already some of this happening among those carriers that have the resources to do so now, experts predict this trend to continue. The number of acquisitions and mergers will ramp up as company executives remain optimistic about what 2016 holds for them.

There is a shortage of truck drivers in this country, as companies are trying to keep up with the demand for product delivery. 81% of all revenues from the shipping industry comes from trucking activity, as the ATA forecasts by 2026 trucking revenues to eclipse $1.5 trillion.

All of this data bodes well for Wabash. This industry has little competition. Trinity Industries who is larger but has seen its stock decline over 41% in the past 52 weeks, with $3 billion in debt. WNC stock is down 8% in the past 52 weeks, the company has almost $3 a share in cash and $300 million in debt.

This is a stock performance comparison to its competitor (WNC is orange and Trinity is blue)

Click to enlarge

WNC is trading much stronger than Trinity. The only other 2 companies in this industry are privately held. All signs are leading to a stronger recovering economy, and I believe the revenues for Wabash will increase over the next few years and further.

Let us discuss this past earnings report from February, here are some of the highlights, I know you will find these impressive.

Fourth quarter and full year GAAP earnings of $0.50 and $1.50 per diluted share, up 85.2 percent and 76.5 percent, respectively, over prior year period

Fourth quarter and full year non-GAAP adjusted earnings of $0.51 and $1.49 per diluted share, up 88.9 percent and 67.4 percent, respectively over prior year period

New $100 million share repurchase program approved by Board of Directors

Net sales of $2.03 billion, a record for the fourth consecutive year and up 9 percent over prior year

Record operating income for the fourth consecutive year of $180.4 million, up 47 percent over prior year

Record quarterly net sales of $544 million, up 3.1 percent over prior year period

Record operating EBITDA of $230 million or 11.3% of net sales, compared to $170 million, or 9% for the previous year.

New trailer shipments totaled 65,000, up 12% from previous year

Current 2016 backlog of orders is $1.2 billion, representing a 10% increase over last year.

Trailer demand expected to be well above replacement levels for a 5th consecutive year.

5 Year average growth rate of 23%, compared to the industry's 1.26%

The Trend Is Your Friend!

Trailer market factors continue positive, however, even after five straight years of growth

Fleet age has improved, but plenty of old trailers are driving the average age of trailers above historical averages. Old equipment impacts customer service and productivity

Pent-up demand remains following the aftermath of the Great Recession

Improved economy and increasing freight volumes are fueling demand for trailers

Improved fleet profitability and attitudes are making fleets able and willing to buy

With all of this good news, there still remains a healthy short position of around 15%. I believe this company is poised for a run to $15 a share, and the shorts will be running for cover. I am comfortable buying below $13 a share and watching it for awhile. For you covered call folks, there isn't much. You have to go out and write the October 15's for 4%, I would let it run a little before I committed to that. Good luck as always!

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.