Carclo shareholders will be smiling, as their shares are up by 11% at the time of writing, but Wincanton investors may be concerned, as the haulier’s stock is falling today.
Carclo surges ahead
Carclo announced today that full-year profits are expected to be above previous expectations.
The latest consensus forecasts suggest adjusted earnings per share of 6.7p for the current year, so I’d suggest that earnings of around 8p per share may now be more likely. This puts Carclo shares on a tentative full-year P/E ratio of 13.9, which isn’t too bad.
There was more good news, too. Carclo currently offers a prospective yield of around 2.4%, but announced today that it intends to “commence a capital reorganisation process to cancel its share premium account and capital redemption reserve in order to augment its distributable reserves and enable future dividends to be paid“.
Shareholders will receive more detail about this in coming weeks, but essentially this is an accounting change that will enable Carclo to pay out a greater share of future profits as dividends.
The company hasn’t fleshed out its plans yet, but I reckon this change could see Carclo’s payout rise from its current level of 2.65p towards 3.5-4p, which would still be twice covered by next year’s forecast earnings.
Shares in Wincanton have risen by 18% over the last three months, probably because the logistics firm looks very cheap on a superficial P/E basis, with a 2015 forecast P/E of just 9.
However, the shares have fallen by around 7% today, despite the firm confirming that trading remained in-line with expectations during the final quarter of last year.
One piece of news that may have disappointed some investors is that lower fuel prices won’t benefit Wincanton’s profits, as the firm always passes any changes in fuel costs directly to its customers.
A second reason to remain cautious about Wincanton is the perilous state of its finances. Debt levels are high, and virtually all of Wincanton’s cash flow is used to make interest payments and pension deficit payments — the firm has no scope to pay dividends for the foreseeable future, and is effectively being run to service its debts.
In my view, Carclo may be worth a closer look, but Wincanton should be avoided at all costs.