January 23, 2008

ABX Holding

Some notes from the Fool. It is a MF Hidden Gems Paydirt Pick:

And last, but certainly not least, is air cargo transporter ABX Air. The Wilmington, Ohio, airliner, created from the merger of Airborne Express and DHL, is one of the fastest-growing companies in the industry.

The reduction of truck-line haul-management services ABX Air provides to its largest customer, DHL, has affected earnings recently. However, many in CAPS land, including member humvee5000, see the company's stock price, fundamentals, and future outlook as a nice opportunity:

Low P/E with good future earnings growth. Fourth quarter should be very good. Cash flow is great. My expectations are that we should see 30% to 50% gain in PPS [price per share] as the negatives of this year fade and the dollars continue to roll in.

Overnight package delivery has helped catapult carriers like FedEx (NYSE: FDX) and United Parcel Service (NYSE: UPS) into the stratosphere, yet the third-largest carrier, DHL, has had a tough going here in the U.S., losing $900 million last year. While some analysts contend that DHL, which is a subsidiary of Germany's Deutsche Post, may end up selling off its domestic business, the company has said that it's commited to keeping itself in the U.S. market.

Despite DHL's assurances, such speculation weighs on the operations of ABX Holdings, which derives nearly all of its business from DHL and operates the shipper's main air hub and package sorting center in Ohio. A dispute over reimbursement for expenses has the two in front of an arbitrator right now, and the uncertainty over which way the quarrel will be resolved has also been holding ABX back. Yet the two companies remain committed to each other -- DHL recently expanded their relationship, despite the expense dispute -- so there doesn't appear to be a divorce in the works anytime soon. In fact, the potential for a merger of the two firms persists.

Those points lead CAPS All-Stars like humvee5000 to see ABX Holdings as offering potential for easy gains.

I seldom am so bullish -- somewhere in the next 2 months - and it could be tomorrow -- this will be bought out by DHL backed company. Tiff between DHL and ABXA caused the stock to drop to 4. Dhl was mad that ABXA did not accept the 7.75 takeover bid when MS said it was worth 9 to 10. Now the stock is at 5. Will be a 50% gain easy! Downside is only what DHL can do as the largest customer to pressure ABXA into selling. and we're only half way there so give it some more patience, before you call out the green.

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