CS First Boston downgraded Roadway (ROAD) to neutral from outperform.
Analyst Gary Yablon says he downgraded the trucking and transportation company for two main reasons: Roadway is closing in on his target price, and he believes it's a better move for investors to watch Roadway build its next-day delivery portfolio from the sidelines -- considering the disappointing performance at New Penn, the company's next-day ground service delivery unit.
Yablon says New Penn turned in a very weak quarter with an operating ratio of 94.6%. Even with unfavorable weather costing Roadway 200 basis points of margin, the results were still below what he expected. Although New Penn is not a key earnings per share driver, he thinks it will be more important as Roadway's next-day segment bulks up.
Yablon sees $3.53 2003 earnings per share, and $4.30 for 2004. He has a $42 target.