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Transportation and logistics solutions provider Universal Logistics Holdings (NASDAQ:ULH) reported results in line with analysts' expectations in Q2 CY2024, with revenue up 12% year on year to $462.2 million. It made a GAAP profit of $1.17 per share, improving from its profit of $0.90 per share in the same quarter last year.
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Universal Logistics (ULH) Q2 CY2024 Highlights:
- Revenue: $462.2 million vs analyst estimates of $461.6 million (small beat)
- EPS: $1.17 vs analyst estimates of $1.14 (2.6% beat)
- Gross Margin (GAAP): 25%, up from 20% in the same quarter last year
- Market Capitalization: $1.16 billion
Founded in 1932, Universal Logistics (NASDAQ:ULH) is a provider of transportation and logistics solutions.
Ground TransportationThe 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 GrowthA company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. Over the last five years, Universal Logistics grew its sales at a weak 4.6% compounded annual growth rate. This shows it failed to expand in any major way and is a rough starting point for our analysis.
Long-term growth is the most important, but within industrials, a half-decade historical view may miss new industry trends or demand cycles. Universal Logistics's history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 5.2% annually. Universal Logistics isn't alone in its struggles as the Ground Transportation industry experienced a cyclical downturn, with many similar businesses seeing lower sales at this time.
This quarter, Universal Logistics's year-on-year revenue growth clocked in at 12%, and its $462.2 million of revenue was line with Wall Street's estimates. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months, a deceleration from this quarter.
Operating Margin
Universal Logistics has done a decent job managing its expenses over the last five years. The company has produced an average operating margin of 8.7%, higher than the broader industrials sector.
Analyzing the trend in its profitability, Universal Logistics's annual operating margin rose by 5.8 percentage points over the last five years, showing its efficiency has meaningfully improved.
In Q2, Universal Logistics generated an operating profit margin of 10.2%, up 1.4 percentage points year on year. Since its gross margin expanded more than its operating margin, we can infer that leverage on its cost of sales was the primary driver behind the recently higher efficiency.
EPSWe track the long-term growth in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company's growth was profitable.
Universal Logistics's EPS grew at an astounding 19.3% compounded annual growth rate over the last five years, higher than its 4.6% annualized revenue growth. This tells us the company became more profitable as it expanded.
We can take a deeper look into Universal Logistics's earnings quality to better understand the drivers of its performance. As we mentioned earlier, Universal Logistics's operating margin expanded by 5.8 percentage points over the last five years. On top of that, its share count shrank by 7.2%. These are positive signs for shareholders because improving profitability and share buybacks turbocharge EPS growth relative to revenue growth.
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 Universal Logistics, its two-year annual EPS growth of 7% was lower than its five-year trend. We hope its growth can accelerate in the future.
In Q2, Universal Logistics reported EPS at $1.17, up from $0.90 in the same quarter last year. This print beat analysts' estimates by 2.6%. Over the next 12 months, Wall Street expects Universal Logistics to perform poorly. Analysts are projecting its EPS of $4.85 in the last year to shrink by 4.1% to $4.65.
Key Takeaways from Universal Logistics's Q2 Results It was good to see Universal Logistics slightly beat analysts' revenue and EPS expectations this quarter. Zooming out, we think this was a decent quarter, showing the company is staying on target. The stock remained flat at $45.04 immediately following the results.
