Labor Day weekend is coming and if you have travel plans, you might be making a stop at a facility owned by small cap TravelCenters of America LLC (NYSE: TA) which is also worth taking a closer look at from an investment standpoint along with the PowerShares Dynamic Leisure and Entertainment ETF (NYSEARCA: PEJ) and iShares Dow Jones Transportation Average ETF (NYSEARCA: IYT).
What Are TravelCenters of America LLC Along With PEJ & IYT?
Small cap TravelCenters of America LLC is the largest full-service travel center company in the United States, serving professional drivers and motorists traveling on highways with the finest full-service facilities on the road. More specifically, TravelCenters of America LLC offers diesel fuel and gasoline plus full-service restaurants, branded lodging and nationally known fast food restaurants at 165 sites with 145 sites owned by Hospitality Properties Trust (NYSE: HPT) and operated by TA; 10 sites owned by HPT and franchise operated; and 10 franchisee-owned and operated.
Meanwhile, the PowerShares Dynamic Leisure and Entertainment Portfolio tracks the Dynamic Leisure and Entertainment IntellidexSM Index which is comprised of the common stocks of 30 US leisure and entertainment companies while the iShares Dow Jones Transportation Average ETF tracks the Dow Jones Transportation Average Index which contains stocks of airlines, trucking, railroads, air freight, transportation services and industrial services.
What You Need to Know About TravelCenters of America LLC
In early August, TravelCenters of America LLC plunged from the $11.70 level down to the $8 level after missing earnings expectations by a mile. TravelCenters of America LLC had reported revenues of $2,018,754 verses $2,041,507 for the same period last year while net income plunged approximately 46.5% or $13.9 million to $16.0 million. The CEO noted:
“The 2013 second quarter results are reflective of softer industry conditions than experienced in the 2012 second quarter. Despite that softness, I remain excited about the future opportunities I expect our leadership position in our industry and our capital investments will provide.”
In the earnings call, TravelCenters of America LLC’s CEO gave two specific reasons for the net income plunge:
- Same-site fuel margin declined by about $11 million due to lower retail margins as a result of pressure from some of the company’s “principal competitor's efforts to retain or gain volume as a result of the current turmoil affecting our largest competitor and to a lesser extent, a modest volume decline resulting from fuel conservation efforts by our customers” (NOTE: There have been potentially improper rebate payments to customers by competitor Pilot Flying J)
- Same-site nonfuel margin oversight level operating expenses declined by about $2 million due to changes in the tire business which, despite unit sales growth, has seen per unit margin shrink over the past year due to industry-wide changes in tire pricing.
However, would-be investors would be wise to carefully read the entire earnings call transcript. Otherwise, its worth noting that TravelCenters of America LLC has a trailing P/E of 11.09 and a forward P/E of 7.30 – meaning its looking pretty cheap right now.
Share Performance: TravelCenters of America LLC vs. PEJ & IYT
On Thursday, small cap TravelCenters of America LLC rose 3.61% to $7.74 (TA has a 52 week trading range of $4.18 to $12.50 a share) for a market cap of $228.87 million plus the stock is up 67.9% since the start of the year, up 49.1% over the past year and up 186.7% over the past five years. The PowerShares Dynamic Leisure and Entertainment ETF is up 34.3% since the start of the year, up 39.5% over the past year and up 127.9% over the past five years while iShares Dow Jones Transportation Average ETF is up 21.7% since the start of the year, up 23.7% over the past year and up 23.1% over the past five years.
As you can see from the above chart, small cap TravelCenters of America LLC has outperformed PowerShares Dynamic Leisure and Entertainment ETF and iShares Dow Jones Transportation Average ETF albeit its been a much more volatile performance.
Finally, here are the latest technical charts for all three:
The Bottom Line. Any reports of more people on the roads for Labor Day weekend could give small cap TravelCenters of America LLC plus the stock is looking rather cheap now; but again, investors would be wise to read the entire earnings call transcript.