Analysts positive on Proficient Auto Logistics (Courtesy of the Jacksonville Daily Record) — Proficient Auto Logistics Inc. has been in business for less than a month, but analysts already see some advantages that give the Jacksonville-based company a positive outlook.
Proficient was created to merge five companies together that transport automobiles from manufacturers to dealers.
The company went public May 8 and then completed the acquisition of the five companies May 13. It had no operations before that.
Analysts weighed in June 3 with their first ratings on Proficient following the initial public offering, with one rating it as a “buy” and two at “outperform.”
“We believe Proficient has the ability to take share in an auto hauling industry characterized by declining union market shares, a post covid recovering domestic auto market, and utilizing enhanced scale through the combination of its five operating companies,” Raymond James analyst Patrick Tyler Brown said in his initiation report.
“Further, significant backhaul, subhaul, and procurement synergies all represent upside to the Proficient story,” Brown said.
“Finally, the inability to flow capacity in and out of the market easily creates higher barriers to entry and what we believe to be a sticky growth engine leading to superior pricing power and margin expansion in time,” he said.
Basically, a company that wants to get into the auto transport business needs a dedicated fleet of trucks that can handle it.
“While supply in the truckload sector (think dry van, refrigerated, and flatbed) can easily flow in and out of the market given low barriers to entry, the auto-hauling market is more insulated from rapid supply changes given the physical combination of the tractor (truck) to the car hauler (trailer),” Brown said.
“Simply, while it is easy for a standard Class 8 tractor to change trailer type and bounce from one market to another (dry, refrigerated, flatbed, etc.), this is not the case for auto haulers given the difficulty surrounding detaching its specialized trailer from its tractor.”
As a publicly traded company dedicated to transporting automobiles, Proficient is unique, the analysts said.
Proficient’s IPO filings with the Securities and Exchange Commission said it is the third-largest company in its field with 1,130 auto transport vehicles, ranking behind Plymouth, Michigan-based United Road Services, with 1,978 vehicles, and Kansas City, Missouri-based Jack Cooper Investments, with 1,286.
“PAL is the third-largest auto hauler based on fleet size, but we see an opportunity for PAL to be No. 1 in five years via share gains and M&A activity. Today, it has 3% share of the $11 billion U.S. new and remarketed auto hauling market,” William Blair analyst Ryan Merkel said in his report.
The top two competitors are privately owned, leaving Proficient without a peer group in the stock market. That may make it difficult for investors to assess its value.
“While it has no pure-play, public comparables, we believe that competitive dynamics, secular market growth opportunities, and idiosyncratic margin improvement potential support a valuation that sits between truckload (TL) and less-than-truckload (LTL) on the multiple continuum,” Stifel analyst J. Bruce Chan said in his report.
“Over time, we believe Proficient should continue to rate toward the LTL group. The company is well-managed and well-governed, in our view, and has ample market opportunities from increasingly service focused customers, recovering SAAR (seasonally adjusted annual rate of auto sales), industry consolidation, nearshoring, and de-unionization trends,” he said.
“Meanwhile, route densification, asset utilization, and fleet insourcing opportunities should continue to drive operating margins into double-digit territory in the near-term, in our view.”
Proficient sold its stock at $15 a share in the IPO, and the stock has remained close to that price in its first month of trading.
Brown set an $18 price target for the stock and Chan set it at $19.
“We think PAL is a compelling story at an attractive valuation,” Chan said.
Photo courtesy of Proficient Auto Logistics Inc.