Daily ShareChat: Freightways

Freightways' 20% drop in fourth quarter operating earnings "serves as a reality check for the strength of the macro headwinds in the real economy," says ABN Amro Craigs analyst Geoff Zame.

The company's $15 million in earnings before interest, tax, depreciation and amortisation was well below his estimate of $18.2 million.

However, if a $2 million provision for bad debts and a lower write-back of unearned income from prepaid courier tickets is taken into account, the effective earnings decline was about 10%. Freightways' customers are responding to the recession by using up their prepaid ticket before re-ordering.

Freightway's express package volumes declined about 5% in the second half with its lower tier and point-to-point brands used by retailers being impacted the most amid weak consumer spending.

The company hasn't pushed through its annual CPI price increase as it usually does about this time of year.

Zame has lowered his per-share earnings forecast by 8% but is still maintaining his "buy" recommendation. "While the extent of the earnings decline surprised us, it serves to highlight the operational leverage Freightways should exhibit when underlying economic growth resumes," he says.

"Freightways is one of a handful of high-quality recovery stories on the NZX." Investors should regard any share price weakness as a buying opportunity, Zame says.

BROKER CALL:  ABN Amro Craigs rate Freightways (NZX: FRE ) as buy.

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