Why TravelCenters of America Shares Plummeted

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of TravelCenters of America tumbled as much as 32% today after the company posted a dismal earnings report.

So what: The operator of roadside rest areas said revenue slipped 1% in the quarter to $2.02 billion, while earnings per share was slashed nearly in half from $1.04 to $0.54. Revenue was off the mark of $2.12 billion, while earnings were not anywhere close to the $1.00 analysts had expected. Management blamed the decline in gross margin per gallon in fuel for the slip, as it dropped from $0.19 in the quarter a year ago to $0.17, and said its 20 sites acquired in the past year have not reached full operating capacity. CEO Thomas O'Brien added that "softer industry conditions" had been a problem in the quarter.


Now what: Just as we saw some of the oil majors post disappointing quarters last week on low oil prices, it's not surprising to see TravelCenters doing the same as its main business is selling gasoline. ExxonMobil, for instance, said the spread between crude and gasoline declined 12% last quarter, a discrepancy that is likely to change in the volatile energy market. Oil prices have already come up more than $100 a barrel, and the spread between gasoline is likely to return to its historical norm at some point. With the acquisitions TravelCenters has been making, it should be poised for growth and shares are cheap after the fall at a P/E of just 7 after today's drop. The price may be too good to ignore.

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The article Why TravelCenters of America Shares Plummeted originally appeared on Fool.com.

Fool contributor Jeremy Bowman has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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