March 17, 2005.
Be sure to consult our Hot List to get our original opinions on buy and sell price ranges.
Highlights
Provider of third party logistics
Third quarter revenues increased 70% to $256 million
Awarded a new multi-million dollar contract
Restructured operations
Strong outlook for fiscal 2005
Outlook - A provider of third party logistics, Stonepath Logistics, Inc. (STG) is a restructured, focused, streamlined company with growing revenues. The company recently announced new logistics contracts, was awarded an "On Time Performance Award", and has regained compliance with AMEX.
While we believe STG has excellent long-term growth potential, it is a very speculative stock. Weak fourth quarter results or any number of factors could see the company’s share price reverse its recent trend. As such, we believe STG is most suited to our more experienced traders.
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3PL, or “third party logistics”, describes businesses that provide one or many of a variety of logistics-related services. Types of services include public warehousing, contract warehousing, transportation management, distribution management, and freight consolidation.
Of the top logistics providers in the transportation industry today, many CEO’s believe that only half will be active and independent within a few years. Today’s shippers are focused, demanding complete transportation solutions -- more services, fewer vendors and full visibility of their supply chains.
Recent studies suggest that shippers currently outsource 20% of their supply chain; enormous opportunities then, exist for logistics companies that can provide exceptional technology-driven solutions. When it comes to “middle-market” companies, STG leads the way with their innovative technology solutions and operational excellence.
Business Profile - Stonepath has hit the highway. STG is a non-asset-based, third-party logistics services company providing a full range of time-definite transportation and distribution solutions for companies seeking to move or distribute products both domestically and internationally.
From strategic locations around the world, on virtually every continent, STG is able to offer fully managed integrated logistics services encompassing all aspects of the supply chain.
The company manages and arranges a full range of transportation and distribution solutions through its domestic services platform, including the movement of raw materials, supplies, components and finished goods for its customers. These services are offered through its domestic air and ground freight forwarding business.
STG also offers a full range of global services through their international division, including: international air and ocean transportation, as well as customs house brokerage services.
In addition to these core offerings, STG also provides enhanced efficiency and profitability for their customers through their Technology Service Division. The company’s new operating system, Tech-Logis, enhances STG’s operational capabilities and is designed to give customers immediate access to their entire supply chains through a state-of-the-art Web-based portal.
Fundamental Analysis- On January 6, 2005 STG announced its financial results for the three and nine months ended September 30, 2004. The company also announced its restated results for the three and nine months ended September 30, 2003.
On September 20, 2004, STG announced that it had understated its accrued purchased transportation liability and related costs of purchased transportation and began the process of restating its previously reported results for 2003 and the first and second quarters of 2004.
The company expects to report an aggregate reduction in the previously reported net income for 2001 through the first six months of 2004 of approximately $16.3 million.
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For the third quarter of 2004, STG reported revenue of $109.7 million, and a net (loss) of ($0.6 million). For the corresponding period of the prior year, as restated, revenue was $65.5 million, and net income was $1.4 million.
For the nine months ended September 30, 2004, STG reported revenue of $256.4 million, and a net (loss) of ($7.0 million). For the corresponding period of the prior year, as restated, the company reported revenue of $150.4 million, and a net loss of ($2.2 million).
Dennis Pelino, Chairman, remarked, "We have made and continue to make significant management and operational changes across the USA organization. These changes, most of which were implemented during November and December, were surgical, decisive, and designed to provide a platform in North America that will deliver sustainable, profitable growth."
"We are firmly focused on serving and building upon our diverse customer base, inspiring our employees and partners around the world, and increasing shareholder value."
Based on the first nine months results and outlook for the balance of the year, STG expects its current platform to deliver $340 million in gross revenue for 2004 and is targeting $375 million in gross revenues for 2005.
Recent News- On March 15, STG announced that it was honored with an "On Time Performance Award" from Detroit-based National Logistics Management (NLM), in recognition of STG's exceptional on-time execution for NLM and the automotive industry in the premier air market.
The award was based on STG achieving outstanding on-time performance of 98.58% for 2004, placing Stonepath at the top of NLM's roster of approximately 450 carriers.
NLM manages premium air and expedited ground shipments for Ford Motor Company, General Motors, Daimler Chrysler, Visteon and a number of other tier-one suppliers.
In early March, STG announced it has been selected by Comfort Line Products, Inc., the largest manufacturer of portable spas in the world, to support their domestic and international logistics and distribution needs.
STG’s global logistics network will assist Comfort Line in their continued growth in the home spa market, including playing a key role in fulfilling orders expected from multiple planned appearances on HSN (Home Shopping Network) in 2005.
On February 28, STG filed with the Securities and Exchange Commission (SEC) an amended Form 10-Q (an unaudited quarterly financial report) for the quarter ended September 30, 2004 and regained compliance with the American Stock Exchange's continued listing standards. Additionally, STG filed a Form 10-K/A containing restated financial statements for 2003 on February 11, 2005.
"With these filings behind us, Stonepath is much better positioned to focus on the enormous opportunities available in the worldwide marketplace for logistics services," commented Dennis L. Pelino, Chairman. "We firmly believe that Stonepath has the right management team, geographic reach, business mix and strategic focus to deliver significant value for our customer and shareholder base."
In mid-February STG announced that it signed a multi-million dollar contract with Savers, Inc., a Bellevue, Washington-based business operating nearly 200 for-profit thrift outlets throughout the United States, Canada and Australia.
Conclusion - A provider of third party logistics, STG is a restructured, focused, streamlined company with growing revenues. The company recently announced new logistics contracts, was awarded an "On Time Performance Award", and has regained compliance with AMEX.
In January STG reported its financial results for the third quarter ended September 30, 2004 and restated results for the same period in fiscal 2003. Third quarter 2004 revenues increased 67.48% year-over-year to $109.7 million; year-to-date revenues rose 70.47% to $256.4 million.
In an effort to further consolidate the company’s businesses and to improve its profitability, STG launched a restructuring initiative. As a result of the restructuring, the company expects to take a charge in the fourth quarter and the first quarter of 2005.
Jason Totah, CEO, commented, "We are positioning ourselves for a solid 2005 with a clear organizational structure and tougher accountability throughout the Stonepath organization."
"Our international and offshore performance remains robust and we are in the process of making the domestic division more efficient and more profitable."
Pelino continued, "During the first half of 2005, we will consolidate the Corporate Headquarters and the Domestic and International Divisional Headquarters into one central management facility in Seattle, Washington. This streamlining will eliminate unnecessary duplication of efforts as well as give us a much more cohesive day to day management coordination capability."
Restructured operations, compliance with the AMEX and strong year-end fiscal results ought to help reinvigorate the markets confidence in STG and improve the company’s overall profitability and long-term potential.
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STG
Stonepath Group Inc.
March 17th Market: AMEX
Profile Price: $1.10
Buy Opinion: 1.10 - 1.35
Short-term Sell: 2.40 - 2.90
Long-term Sell: 2.90 - 3.50
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