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Wabash National Corporation - Change Is Coming


Purchased Supreme Industries.

Started Paying a Dividend.

Buying Back Stock.

You would think that purchasing Supreme Industries, paying a regular dividend and buying back stock shares would represent sound management. I think it represents "wannabe" management.

Okay, I'll give you purchasing Supreme Industries was probably a good move, but the company had to increase it's debt by 130% to make that happen.

Instead of taking a parade and handing out toilet paper, maybe management should return to days long past and get out of debt. Then paying regular dividends and buying back stock would make sound business sense.

Or at least it would to me. But who am I? Just a shareholder.


Wabash National CorporationWabash National Corporation is an industrial manufacturer of semi-trailers and liquid transportation systems. The company designs, manufactures, and markets dry freight and refrigerated trailers, platform trailers, bulk tank trailers, dry and refrigerated truck bodies, truck-mounted tanks, intermodal equipment, aircraft refueling equipment, structural composite panels and products, trailer aerodynamic solutions, specialty food grade and pharmaceutical equipment. Industry peers include Great Dane Limited Partnership, Trinity Industries, and Utility Trailer Manufacturing Company.

Short-Term ValueMy short-term (3-6 week hold) target price for the stock is $22.17, with an initial trailing stop at $19.04. Upward price movement will find resistance at $19.56 and $20.18, with final resistance found at $20.59. Downward price movement will find support at $18.89.

Days to CoverThe most recent days to cover number is 17. The days to cover number is a measurement of the company’s outstanding shares that are currently shorted, expressed as the number of days required to close out all the short positions. The number is determined by dividing the number of outstanding shares currently shorted by the average daily volume. The days to cover number is sometimes used as a volatility precursor for a stock.

The Tax ActThe Tax Cuts and Jobs Act of 2017 makes broad and complex changes to the U.S. tax code, including, but not limited to, (1) reducing the U.S. federal corporate tax rate from 35% to 21%; (2) requiring companies to pay a one-time deemed repatriation transition tax (the “Transition Tax”) on certain earnings of foreign subsidiaries; (3) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries; (4) requiring a current inclusion in U.S. federal taxable income of certain earnings of controlled foreign corporations; (5) eliminating the corporate alternative minimum tax (“AMT”) and changing how AMT credits can be realized; (6) capital expensing; (7) eliminating the deduction on U.S. manufacturing activities; and (8) creating new limitations on deductible interest expense and executive compensation.

The Securities Exchange Commission staff issued Staff Accounting Bulletin (“SAB”) 118 which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete.

To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.

It is important to note that income tax adjustments applied to repatriated earnings and deferred taxes, may distort a companies earnings and consequently its fair value.

In the case of Wabash National Corporation, the re-measurement of deferred tax assets and liabilities at the new tax rate resulted in a provisional tax benefit of approximately $19.7 million.

Note that for fiscal 2017, 0% of net income came from income tax benefits.

Insider TransactionsIn the past 12 months, the company reported 48 insider trades involving 771,097 shares of stock. Of those 48 insider trades, 31 were Buys involving 560,995 shares of stock, and 17 were Sells involving 210,102 shares of stock, creating an insider buy to sell ratio of 2.7 to 1.

Mergers/AcquisitionsIn September 2017, the company completed the acquisition of Supreme Industries, Inc. (“Supreme”), a manufacturer of specialized commercial vehicles, including cutaway and dry-freight van bodies, refrigerated units, and stake bodies with manufacturing facilities in Goshen and Ligonier, Indiana; Jonestown, Pennsylvania; Cleburne, Texas; Griffin, Georgia; and Moreno Valley, California. The aggregate purchase price of $360.4 million.

Divestitures/DispositionsThere were no divestitures or dispositions during fiscal 2018.

Year-Over-YearSeveral year over year metrics of interest are revenue growth, free cash flow growth, earnings growth, debt growth, price growth, and year to date price growth. For Wabash National Corporation, revenue decreased by 4%, earnings decreased by 5%, free cash flow decreased by 7%, total debt was increased by 132%, and the stock price increased by 27%. Year to date the stock price is down 11%.

Future ValueMy future (5 year hold) target price for the stock is $31, which is an average annual return of 12%. A prior five year hold of the stock (FY2013- FY2017) would have returned an average of 29% per year. Past and future gains are based on actual and anticipated earnings, actual and anticipated dividends, and actual and anticipated price appreciation. Any investment has the potential for loss, and past performance is no guarantee of future results.

Baseline and Fair ValueAs an on-going concern, my baseline valuation for the company is $24. Baseline valuations are based on free cash flow value, net current asset value, book value, and tangible book value. My current fair value for the stock is $27. The fair value number is my current valuation for a stock based on earnings, earnings growth, and the current 5-year yield of a AAA rated corporate bond. Value investing buy, sell, and close targets are derivatives of fair value.

Value ConsiderationsOther value considerations include the PE Ratio, the PEG Ratio, Book Value, and Tangible Book Value. For Wabash National Corporation the current twelve month trailing PE Ratio is 9, the PEG Ratio is 0.2, Book Value is $9, and Tangible Book Value is (-$1).

Fair WarningFair warning means that the time for bidding has ended and an exchange is about to be concluded. Wabash National Corporation (NYSE: WNC) – FYE 12/2017 – FAIRLY VALUED The stock is currently trading at levels in line with my most recent $27 fair value estimate. Please See Linked PDF Worksheet

DisclosureI hold shares of Wabash National CorporationPosted on 07/06/18

Disclosure: I am/we are long WNC.