Citi backs Saia stock with focus on operational improvements and terminal expansion slowdown

On Tuesday, Citi analyst Ariel Rosa revised the price target for Saia Inc. (NASDAQ:SAIA) to $561 from the previous $644 while maintaining a Buy rating on the company's shares. According to InvestingPro data, the stock currently trades at a P/E ratio of 33.7x, suggesting a premium valuation. Saia, a carrier in the less-than-truckload (LTL) sector, has been identified by Citi as their top pick within the industry.

The adjustment reflects a year that mixed fortunes for Saia, marked by a second year of operating ratio deterioration. This was partly due to the company's aggressive expansion strategy, which included the addition of 28 new service centers and efforts to strengthen its presence in underdeveloped areas.

Despite the challenges in 2024, Citi anticipates a slowdown in terminal expansion for Saia in 2025. The firm expects the carrier to focus on reducing costs and increasing freight density. With a robust revenue growth of ~14% in the last twelve months and a "GOOD" overall financial health score from InvestingPro, the company appears well-positioned for operational improvements.

Additionally, Saia aims to enhance pricing strategies and service quality. These measures are expected to support the stock's performance, especially considering its modest discount compared to top quartile LTL peers such as ODFL and XPO.

Citi also notes potential in TFI International (NYSE:TFII), another player in the LTL market. TFI International is recognized for its high-quality management and robust free cash flow. Although it has been undervalued in comparison to non-union LTL peers, Citi suggests that improvements in its LTL operations could lead to considerable stock gains in 2025.

The analyst's commentary indicates a belief in significant self-help opportunities for Saia, which could drive returns in the upcoming year. For deeper insights into Saia's valuation and growth prospects, investors can access comprehensive analysis and 12 additional ProTips through InvestingPro's detailed research reports.

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