Freight transportation and logistics provider Saia (NASDAQ:SAIA) reported results in line with analysts' expectations in Q2 CY2024, with revenue up 18.5% year on year to $823.2 million. It made a GAAP profit of $3.83 per share, improving from its profit of $3.42 per share in the same quarter last year.
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Saia (SAIA) Q2 CY2024 Highlights:
- Revenue: $823.2 million vs analyst estimates of $825 million (small miss)
- EPS: $3.83 vs analyst expectations of $4.01 (4.4% miss)
- Gross Margin (GAAP): 27.8%, down from 28.7% in the same quarter last year
- Free Cash Flow was -$94.32 million compared to -$350.4 million in the previous quarter
- Sales Volumes rose 9.7% year on year (-1.7% in the same quarter last year)
- Market Capitalization: $12.97 billion
Saia President and CEO, Fritz Holzgrefe, commented on the quarter stating, “During the quarter, we successfully opened six new terminals and relocated two others in new and established markets, while maintaining our high service standards. Successfully opening and relocating terminals required investments in employee hiring, training and other costs that come in advance of opening and revenue generation. We are pleased to see the continued customer acceptance of these facilities, as well as the 23 other terminals opened in the last three years. We are excited about the opening of our new Stockton, California and Davenport, Iowa terminals earlier this week, and as we move through the rest of 2024, we plan to continue executing on our opening timeline, with the potential to open an additional 10 to 13 new terminals this year.”
After realizing that there was more success in delivering produce rather than selling it, Saia (NASDAQ:SAIA) makes less-than-truckload deliveries in the United States.
Ground Transportation
The growth of e-commerce and global trade continues to drive demand for shipping services, especially last-mile delivery, presenting opportunities for ground transportation companies. The industry continues to invest in data, analytics, and autonomous fleets to optimize efficiency and find the most cost-effective routes. Despite the essential services this industry provides, ground transportation companies are still at the whim of economic cycles. Consumer spending, for example, can greatly impact the demand for these companies’ offerings while fuel costs can influence profit margins.
Sales Growth
A company’s long-term performance can give signals about its business quality. Even a bad business can shine for one or two quarters, but a top-tier one tends to grow for years. Luckily, Saia's sales grew at an excellent 12.7% compounded annual growth rate over the last five years. This is encouraging because it shows Saia's offerings resonate with customers, a helpful starting point. 
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Saia's annualized revenue growth of 8.4% over the last two years is below its five-year trend, but we still think the results were respectable.
We can better understand the company's revenue dynamics by analyzing its sales volumes, which reached 1.56 million in the latest quarter. Over the last two years, Saia's sales volumes averaged 1.7% year-on-year growth. Because this number is lower than its revenue growth, we can see the company benefited from price increases. 
This quarter, Saia's year-on-year revenue growth clocked in at 18.5%, and its $823.2 million of revenue was line with Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 9.2% over the next 12 months, a deceleration from this quarter.
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Operating Margin
Saia has been an optimally-run company over the last five years. It was one of the more profitable businesses in the industrials sector, boasting an average operating margin of 14.4%. This result was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes huge shifts to move meaningfully. Companies have more control over their operating margins, and it's a show of well-managed operations if they're high when gross margins are low.
Analyzing the trend in its profitability, Saia's annual operating margin rose by 7.7 percentage points over the last five years, as its sales growth gave it immense operating leverage.
In Q2, Saia generated an operating profit margin of 16.7%, in line with the same quarter last year. This indicates the company's cost structure has recently been stable.
EPS
Analyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions.
Saia's EPS grew at an astounding 27.1% compounded annual growth rate over the last five years, higher than its 12.7% annualized revenue growth. This tells us the company became more profitable as it expanded.
Diving into the nuances of Saia's earnings can give us a better understanding of its performance. As we mentioned earlier, Saia's operating margin was flat this quarter but expanded by 7.7 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don't tell us as much about a company's fundamentals.
Like with revenue, we also analyze EPS over a more recent period because it can give insight into an emerging theme or development for the business. For Saia, its two-year annual EPS growth of 5.3% was lower than its five-year trend. This wasn't great, but at least the company was successful in other parts of the business.
In Q2, Saia reported EPS at $3.83, up from $3.42 in the same quarter last year. Despite growing year on year, this print missed analysts' estimates, but we care more about long-term EPS growth than short-term movements. Over the next 12 months, Wall Street expects Saia to grow its earnings. Analysts are projecting its EPS of $14.21 in the last year to climb by 18.4% to $16.84.
Key Takeaways from Saia's Q2 Results
It was good to see Saia beat analysts' volume expectations this quarter. On the other hand, its EPS missed and its revenue fell short of Wall Street's estimates. Overall, this was not a great quarter. The stock traded down 11.8% to $429.98 immediately following the results.
Saia may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.