Saia Pulls Into A Buying Opportunity

Saia Upgraded To Buy Ahead Of Earnings

We are not surprised to see an upgrade for less-than-truckload freight company Saia (NASDAQ: SAIA) a week ahead of earnings, given its performance. In an era when freight, transit, and logistics are in high demand, the firm is well positioned as a specialist and on-demand supplier of shipping, freight, and logistics services. The company is riding the wave of demand, not only expanding its presence and coverage, but also broadening its footprint and increasing its breadth. In Deutsche Bank's opinion, the firm is positioned to outperform in 2022, and we couldn't agree more.

Deutsche Bank upped its rating on Saia stock to Buy from Hold and raised its price target to $363 which implies about 30% of the upside for the stock. This compares with the market consensus price target of $337, which has been on the rise in each one-year, 90-day, and 30-day periods and is anticipated to continue to ascend.  Integrated operator, J.B. Hunt posted better-than-anticipated earnings driven by growth in all areas. When Susquehanna initiated coverage a month ago, it established a $400 high price target.

Analysts Are Pushing Saia To Unprecedented Heights

The analysts' enthusiasm couldn't be any stronger for this stock. While the consensus is still only a weak buy, the market is gaining new analysts and coverage while its rating and price target are on the rise.  The stock's consensus rating has improved from a weak Hold last year to a weak Buy this year, effectively raising its status by one notch. The price target is up 130% in the last year, 37% in the last 90 days, and 5.5% in the past month, indicating strong momentum.

The flip side of this cone, the institutions, tells a different story. While the net of institutional activity has been bullish in recent months, the trend changed in Q3 2021 and sellers have been out pacing buyers ever since. This coincided with a top in the stock,  that is also an all-time high.  As a result, profit taking and rotation are themes that appear to be prevalent but remain viable possibilities for limiting gains near to short-term. The upshot is that because institutions own almost all of the stock, and since they keep taking money out of the market, the stock should rise when they stop doing so.

Analysts Grossly Underestimate Q4 Revenue

When we saw the consensus estimate for Saia’s Q4 results we knew without a doubt the company would not only beat the consensus but by at least 300 basis points and more toward the low-double-digit range than not. The majority of the experts are expecting revenue to decrease sequentially, which is not supported by the demand picture or pricing environment, nor does it take account of the firm's efforts to grow. We expect revenue to be higher than the consensus by 15% in Q4, and we anticipate strong earnings.

The Outlook

The decline in Saia may have come to an end, but it remains too early to tell. While we anticipate the report will be good, there's no guarantee that it will move the market, and even if it does, it may not be enough to cause a turnaround. The current situation appears bearish, and the stock may drop to $240 or lower before the uptrend resumes.

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