15 Jul 2013

Freightways headwinds temporary - analyst

7:28 am on 15 July 2013

An analyst says he thinks the headwinds Freightways is experiencing are temporary and earnings growth will recover.

Freightways said last week it expects to make an after-tax profit for the 12 months ended June of around $38 million, up 6% on the previous year.

Its earnings outlook for the current 2014 year is also lower. The market was expecting earnings increases of 10 - 12%.

Morningstar analyst Nachi Moghe says although the company is facing headwinds in the short term, its long term story is still intact.

Last week Forsyth Barr Andy Bowley said Freightways is no longer a double-digit earnings growth company because of a fundamental and permanent shift in its business.

But Mr Moghe says Freightways occupies a strong position in the express package industry and is growing reasonably rapidly in Australia in the information management business.

He says the company is well placed over the long-term and will provide steady runs for shareholders over time, and is trading at a reasonably good dividend yield at close to 5%.

Mr Moghe says Freightways' mix is being affected by a shift in volumes of express parcels going from business-to-business towards business-to-consumer which is affecting its margins, since the latter is less profitable.

He says it's cyclic and it's likely that the business-to-business will pick up over the next 12 to 15 months as the economy gains momentum.