Gold prices were on a tear in 2010 before rolling back a bit in recent weeks. But thanks to a sudden spike in gold prices late last week due to unrest in Egypt, investors once again are looking to gold as a hedge against inflation and volatility in the global markets. If that trend bears out, secure logistics companies that transport precious metals such as armored car company Brinks (NYSE: BCO) could get a lift.
With 800 facilities on six continents and more than 9,300 vehicles in 50 countries, the 151-year-old armored transport and logistics company is a significant player in the shipment of precious metals. Brinks’ London headquarters is an approved warehouse and Weigh Master for the London Bullion Market Assn. (LBMA), while the Brinks Global Services office in New York is an authorized depository for NYMEX/Comex.
Secure logistics is particularly important given the number of parties involved in gold and precious metals transactions, as well as the fact that senders and receivers can be located continents away from each other. Direct competitors to Brinks in this sector include Sweden-based Loomis AB and privately held Dunbar Armored.
But as global shipping companies like UPS (NYSE: UPS) and Fedex (NYSE: FDX) are quick to advertise, today’s transport networks run on technology as well as trucks. Over the past 18 months, Brinks has invested in its global logistics technology. And the company is looking to enlarge its secure logistics footprint worldwide.
Last November, Brinks acquired the largest secure logistics company in Mexico, Servicio Pan Americano de Proteccion, for $60 million. SPP’s annual revenues amount to about $385 million. While the Mexican firm specializes in cash-in-transit rather than precious metals transport, Brinks’ acquisition of SPP – in addition to acquisitions in China and India – signals the company’s intent to strengthen its global secure transport services portfolio.
Brinks, which issued a quarterly dividend of 10 cents a share last week and has a decent dividend yield of 1.5%, is expected by analysts to post earnings of 49 cents per share when the company releases its fourth quarter financials on Thursday. Brinks beat analysts’ expectations for the third quarter 2010 with an EPS of 44 cents instead of the estimated 41 cents.
Whether increased demand for physical gold will be responsible for blinging up Brinks’ bottom line is unclear, although theoretically, the more physical gold you sell, the more you need to move and/or store securely.
Brinks’ shares have been on the rise since its 52-week low of $18.30 in early July. In fact, the stock price has risen by more than 22% since early September.
As of this writing, Susan J. Aluise did not hold a position in any of the stocks named here.
