TravelCenters of America (NYSE:TA) reported a net loss of 93 cents per diluted share for the 2011 first quarter ended March 2011 on Monday. Luckily for the company, this isn't as bad as it sounds. Analysts were estimating a loss of $1.03, and in the same quarter last year, the company lost a whopping $2.39 per share. The company also posted sales of $1.78 billion, significantly more than the $1.4 billion reported last year. The company operates and franchises travel centers along major U.S. highways, complete with gas stations, restaurants and other services. TravelCenters was battered by the recession in 2007 and 2008 and may now be working through a recovery. Here we take a closer look at its most recent quarterly report.

Tutorial: Investing 101 For Beginner Investors

Stuck in Park
With the exception of the 2010 fourth quarter, TA has been stalled for quite some time. Hampered by razor-thin fuel margins and a difficult environment for the trucking industry, TA has been consistently in the red. TA's locations typically include restaurants, truck repair facilities, stores, motels and other services. The company operated 229 sites at the end of the first quarter. The company continues to wait for a solid recovery in the hope of generating a consistent profit. Unfortunately, even as other businesses and industries have improved over the past several years, TA's improvement hasn't been strong enough to consistently reach the bottom line.

A Good Landlord
TA was carved out by Hospitality Properties Trust (NYSE:HPT), the company's current landlord and largest shareholder. Last year, HPT struck an agreement with TA to amend its rental terms, effectively giving TA more breathing room for several years. The news sent TA shares surging from around $4 to over $12. Today, shares trade hands for $8. A big portion of TA's operational improvement this quarter was a direct result of reduced rent expenses. Under the agreement with HPT, TravelCenters' annual rent expenses were reduced by $41 million. Fuel gross margins improved on a dollar basis to $61 million, or 12 cents per gallon, up from $50 million, or 10 cents per gallon. Non-fuel gross margins were up on a dollar basis but remained flat as a percentage of sales at 57.9%.

Wait and See
The trucking industry has been hurt badly as a result of the recession. The recent rise in fuel prices isn't helping things. Railroads such as Kansas City Southern (NYSE:KSU) are operating strongly because they can carry much more product per mile on significantly less fuel than trucks, making them less vulnerable to surging fuel prices. Aside from JB Hunt (Nasdaq:JBHT), the share price of most trucking outfits is hurting as oil prices continue to hit highs. Last week's oil pullback is likely nothing more than temporary relief.

The Bottom Line
TA did make some intriguing foreclosure acquisitions during the quarter, so we'll have to wait and see if this capital allocation decision pays off. (For more, see JB Hunt: The Trucking Company That Isn't.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  2. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  3. Mutual Funds & ETFs

    ETF Analysis: iShares Morningstar Small-Cap Value

    Find out about the Shares Morningstar Small-Cap Value ETF, and learn detailed information about this exchange-traded fund that focuses on small-cap equities.
  4. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  6. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  7. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  8. Professionals

    What to do During a Market Correction

    The market has corrected...now what? Here's what you should consider rather than panicking.
  9. Mutual Funds & ETFs

    ETF Analysis: WisdomTree SmallCap Earnings

    Discover the WisdomTree Small Cap Earnings ETF, a fund with a special focus on small-cap and micro-cap stocks with positive earnings.
  10. Mutual Funds & ETFs

    ETF Analysis: iShares US Regional Banks

    Obtain information and analysis of the iShares US Regional Banks ETF for investors seeking particular exposure to regional bank stocks.
RELATED TERMS
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Profit Margin

    A category of ratios measuring profitability calculated as net ...
  3. Quarter - Q1, Q2, Q3, Q4

    A three-month period on a financial calendar that acts as a basis ...
  4. Debt Ratio

    A financial ratio that measures the extent of a company’s or ...
  5. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing ...
  6. Net Present Value - NPV

    The difference between the present values of cash inflows and ...
RELATED FAQS
  1. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>
  4. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  5. What is the difference between the return on total assets and an interest rate?

    Return on total assets (ROTA) represents one of the profitability metrics. It is calculated by taking a company's earnings ... Read Full Answer >>
  6. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>

You May Also Like

COMPANIES IN THIS ARTICLE
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!