SWARS Cultivating a Legacy of Leadership

Transcription

1 SWARS Cultivating a Legacy of Leadership Ken Hoexter Research Analyst ken.hoexter@baml.com Ariel Rosa Research Analyst ariel.rosa@baml.com Transport / Economic Update October 5, 2017

2 Economic Update Transports & Economy - Truck market is tight 2 nd highest demand level and highest pricing level in our BAML proprietary truck shipping survey Post-recession recovery (3 rd longest economic expansion in US history at 98 months, longest ever was 120 months in 1990 s) Trump trade Infrastructure spending, tax cuts, regulatory reform? Is this , or ? 2014 Crude-by-rail, Grain, Chicago, Spending spike, 2015 turn down in demand Crude moves to pipeline, demand rolls over Federal reserve getting more hawkish? (increasing rates, balance sheet normalization) Low unemployment rate could (finally) push wages higher Global Trade / International economies showing signs of life (Canada, Mexico, Europe) ELD mandate (goes into effect December 2017) EV s, Platooning, Automation 2

3 Economic Update Source: BofA Merrill Lynch Global Research, Bureau of Economic Statistics, AAR, and Bloomberg BAML targets 2017e and 2018e GDP growth of +2.1% and +2.3% (and 3Q17 of +2.1% y-y) Rail carloads and US GDP growth have fairly strong correlation (r-squared of 0.58) Rail carloads have significantly higher volatility (standard deviation +/- 6.5% for carloads versus +/- 1.7% for GDP) Carloads experience mix differences between drivers of growth and declines Strength in 2Q17 carloads (up +6.7%) giving way to more moderate +3.0% growth in 3Q17 3

4 Sep-96 Sep-97 Sep-98 Sep-99 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 ISM Manufacturing, Industrial Production ISM Index Industrial Production YoY Growth Source: BofA Merrill Lynch Global Research and ISM Source: BofA Merrill Lynch Global Research, Bureau of Economic Statistics, Bloomberg. Manufacturing and industrial production have recovered from downturn in linked to lower oil prices and resulting drop in capital spending ISM accelerated to 60.8 in September from 58.8 in August - Highest level since May 2004 and 13 th consecutive growth point - ISM reflects purchasing mangers confidence, albeit not actual economic activity 4

5 Consumer Confidence, U.S. Retail Sales Consumer Confidence U.S. Retail Sales YoY Growth Source: BofA Merrill Lynch Global Research, Bureau of Economic Statistics, Bloomberg Source: BofA Merrill Lynch Global Research, Bureau of Economic Statistics, Bloomberg Consumer confidence is near its highest level since 2001 But retail sales remain range-bound, between 3%-5% - Housing starts: 1.18 million units (annualized); up 1.4% yoy - Auto Light Vehicle Sales SAAR for August: million units (annualized); down 6.4% yoy - E-commerce ramping up 5

6 Inventory to Sales Inventory to Sales Source: BofA Merrill Lynch Global Research, Bureau of Economic Statistics, Bloomberg Inventory/Sales ratio has stabilized slightly above its long-term average Lean processes and Just-In-Time thins supply chain mgmt to better deal with uncertain demand outlook But low cost of debt has made holding inventory less costly Changing pattern of DC-Store distribution to DC-Regional DC network 6

7 Transport Mix Trucks v Rails v Airfreight US Transportation Market is approx. $900 million revenues 76% Truck ~9% Rail ~9% Parcel (Air & Ground) ~6% Other Source: BofA Merrill Lynch Global Research, Bureau of Economic Statistics, Bloomberg, ATA 7

8 7/23/2012 8/13/2012 9/3/2012 9/24/ /15/ /5/ /26/ /17/2012 1/7/2013 1/28/2013 2/18/2013 3/11/2013 4/1/2013 4/22/2013 5/13/2013 6/3/2013 6/24/2013 7/15/2013 8/5/2013 8/26/2013 9/16/ /7/ /28/ /18/ /9/ /30/2013 1/20/2014 2/10/2014 3/3/2014 3/24/2014 4/14/2014 5/5/2014 7/23/12 8/23/12 9/23/12 10/23/12 11/23/12 12/23/12 1/23/13 2/23/13 3/23/13 4/23/13 5/23/13 6/23/13 7/23/13 8/23/13 9/23/13 10/23/13 11/23/13 12/23/13 1/23/14 2/23/14 3/23/14 4/23/14 Proprietary BofA ML Truck Shipper Survey Says Diffusion Index 45.0 Diffusion Index Source: BofA Merrill Lynch Global Research % 80% 70% 60% 50% 40% 30% 20% 10% 0% Shippers view of freight demand (0 3 months) Source: BofA Merrill Lynch Global Research Week Negative Neutral Positives Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec BAML Truckload Diffusion Indicator measures shippers 0-to-3 month freight demand outlook Survey hit 76.6 on Friday, 2 nd highest level ever; +37% year-year, +7% sequentially Recent Shipper Comments: Supply shrinking and spot rates climbing faster than expected. 8

9 % of responses % of responses Proprietary BofA ML Truck Shipper Survey Says % 60% 50% 40% 30% 20% 10% 0% Shippers View of Rates All-time high (85%) 1- Negative 2- Somewhat Negative 3- Neutral 4- Somewhat Positive 5- Positive Week of 03/20/14 Week of 04/03/14 Week of 04/17/14 Week of 05/01/14 Week of 05/12/15 Source: BofA Merrill Lynch Global Research Shippers outlook of tractor capacity % 70% 60% 50% 40% 30% 20% 10% 0% Lower Flat More Week of 03/20/14 Week of 04/03/14 Week of 04/17/14 Week of 05/01/14 Week of 05/12/15 9 Source: BofA Merrill Lynch Global Research

10 Aug-96 Aug-97 Aug-98 Aug-99 Aug-00 Aug-01 Aug-02 Aug-03 Aug-04 Aug-05 Aug-06 Aug-07 Aug-08 Aug-09 Aug-10 Aug-11 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 Aug-17 Class 8 Truck Net Orders Historical Class 8 Net Orders 60,000 50,000 Replacement Rate 40,000 30,000 20,000 10, Source: American Trucking Association and ACT

11 Driver Pay / Turnover Driver Pay (Salary & Benefits Expense per mile) Y-Y Change in Salary & Benefits Expense per mile Driver pay for OTR is double-digit discount to Private Fleets, and that is double-digit discount to local comparable construction jobs 225k unfilled construction jobs now. 3 mil of 14 mil workers will leave in next 10 yrs. 70% of construction firms having trouble finding qualified workers In 2003, 31% of drivers were under 35 yrs, today 19%...new entrants not coming Wages will rise (exacerbated by ageing drivers, low nat l unemp, and other jobs) Turnover at 90% at large carriers, up 16 pts, biggest jump since 2010 according to ATA 11 Source: Werner Enterprises and BofAML Global Research

12 Driver Pay / Turnover 12 Source: American Trucking Association and ACT Source: American Trucking Association and ACT

13 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17 Truck Tonnage Truck Activity Historical Truck Tonnage Y-o-Y Changes ATA Truck Tonnage Index JAN 5.1% 7.1% 0.8% 3.7% 1.8% 2.6% FEB 9.9% -0.5% 3.5% 4.0% 7.6% -2.7% MAR 1.8% 2.5% 3.3% 6.4% 1.4% 0.6% APR 3.0% 7.0% 3.3% 2.0% 3.2% -0.8% MAY 4.7% 6.1% 1.9% 1.7% 4.5% 5.2% JUN 2.5% 3.7% 4.9% 3.5% 1.8% 1.2% JUL 6.8% 7.2% 2.4% 2.9% 1.2% 2.7% AUG 2.7% 4.7% 2.9% 3.0% 2.9% 8.2% SEP -3.0% 10.1% 5.4% 0.8% -1.3% - OCT 3.5% 7.0% 4.5% -0.5% -0.9% - NOV 0.4% 8.4% 1.1% 3.2% 4.6% - DEC -4.6% 10.4% 6.1% 1.1% -0.2% - Avg. 2.7% 6.2% 3.4% 2.7% 2.2% 2.1% Source: BofA Merrill Lynch Global Research and ATA Source: BofA Merrill Lynch Global Research and ATA - ATA Truck Tonnage Index increased 2% in Up 8% in August, reflecting tight trucking market and hurricane impact 13 Source: BofA Merrill Lynch Global Research and American Trucking Association..

14 LTL Tonnage and Pricing LTL Tonnage index and Y-Y growth LTL revenue per ton growth Y-Y LTL tonnage growth has been virtually flat; up 0.4% in August Volume impacted by downturn in industrial economy and low Truckload rates But tonnage and pricing expected to increase in the year ahead as Truckload capacity tightens and volume spills over to LTL 14 Source: BofA Merrill Lynch Global Research and American Trucking Association..

15 Rail Carload Data Total Carloads (North America) Total Carload Growth Y-o-Y Rail volumes have been recovering from industrial downturn in Growth rates have moderated in recent months given tougher comps and ample available truck capacity Recovery has reflected mix differences between various sub-segments - Strength in Intermodal, Chemicals and Coal - Weakness in Autos, Petroleum Products and Forest Products 15 Source: American Association of Railroads and BofA Merrill Lynch Global Research.

16 Product revenue breakdown (1) by rail company Coal 17% 12% 17% 18% 10% 4% 8% Chemical Intermodal Auto n/a (In Industrials) n/a (Consumer, 10-K) n/a (In Consumer) 17% 15% 19% 13% 16% 21% 18% 22% 15% 21% 24% 14% 10% 9% 10% 5% 7% 9% Agriculture 20% 17% 15% 11% 22% 16% 19% Other Merch. 24%* (Industrials, 10-K) 26% 22% 27% 29% 33% 29% (1) As a % of Revenue; Company reports, 2Q17 16 Source: Company reports

17 Retail - Intermodal 450, , , , , , , , , , , , Intermodal represents 43% of carloads, up from 13% in More than 25 million containers and trailers are moved via intermodal transportation annually - Double stacking now represents 70% of Intermodal shipments - Intermodal has grown at 5.9% CAGR since 1960, and 2.8% CAGR past decade, well above 2.2% decline in average long-haul truckloads 17 Source: AAR, BofA Merrill Lynch Global Research estimates

18 Retail - Auto 50,000 45,000 40,000 35,000 30,000 25,000 20,000 15, , , , , , , Auto SAAR at 18.5mm units last month, up 1.9% y-y YTD sales are tracking at 17.0mm units, down 2.3% y-y 18 Source: AAR, BofA Merrill Lynch Global Research estimates

19 Weather - Coal Coal Carloads 166, , , , , ,000 94,000 82,000 70, After 2016 pullback, 2017 normalization but inventories still high - NS noted inventories at 90 days in the South (vs normal level of 70 days) and 80 days in the North (vs normal level of 50 days) - CSX coal revenue down 51% from peak in 2011; volume down 56% from peak in CSX coal revenue at only 17% of total from over 30% in Source: AAR, BofA Merrill Lynch Global Research estimates

20 Weather - Grain Grain Carloads 50,000 45,000 40,000 35,000 30,000 25,000 20, US Corn production down 6% in 2017 crop year from record year in 2016 when it was up 11% - US Soybean production down 1% in 2017 from record in 2016 when it was up 10% 20 Source: AAR, BofA Merrill Lynch Global Research estimates

21 Industrials - Chemicals Leading Indicator Chemical Product Carloads 70,000 66,500 63,000 59,500 56,000 52,500 49, Source: AAR, BofA Merrill Lynch Global Research estimates

22 Industrials Paper & Forest Products Paper & Forest Products Carloads 3,900 3,500 3,100 2,700 2,300 1, Source: AAR, BofA Merrill Lynch Global Research estimates

23 Petroleum Petroleum Products Carloads 40,000 35,000 30,000 25,000 20, Source: AAR, BofA Merrill Lynch Global Research estimates

24 YTD Port Volumes Global Trade Rebound Top 9 U.S. Ports; July and August TEU volumes LA/Long Beach Port Volumes 2017 Jun-17 Jul-17 Jul-17 Top 9 U.S. Ports TEU s Y-O-Y % Y-O-Y % TEU s Los Angeles (19% of total US) 3,799,675 4% 14% 572,017 Long Beach (16% ) 2,975,160 3% 8% 504,918 Total LA/LB (35% of total) 6,774,835 4% 11% 1,076,935 New York (13% ) 2,724,102 7% 5% 404,454 Savannah (8% ) 1,870,690 13% 7% 265,687 Seaport Alliance (7% ) 1,343,702-12% -7% 172,781 Norfolk (6% ) 1,308,479 5% 4% 184,918 Oakland (5% ) 1,070,611 4% 1% 159,656 Houston (4% ) 1,198,681 15% 7% 167,566 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% Charleston (5% ) 1,029,599 13% 0% 143,084 Total Top Nine (83% of total) 17,320,698 5% 6% 2,575,080 Vancouver 1,607,566 9% 11% 243,635 Top 9 LA & LB Total loaded TEU volumes have averaged +2% YTD at the Top 9 U.S. Ports At Los Angeles/Long Beach, total loaded TEU volumes have averaged +4% YTD 24 Source: BofA Merrill Lynch Global Research estimates, Ports of LA/LB, NY/NJ, Savannah, SeaTac, Norfolk, Oakland, Houston, Charleston, and Vancouver reports.

25 1993-Jan 1994-Jan 1995-Jan 1996-Jan 1997-Jan 1998-Jan 1999-Jan 2000-Jan 2001-Jan 2002-Jan 2003-Jan 2004-Jan 2005-Jan 2006-Jan 2007-Jan 2008-Jan 2009-Jan 2010-Jan 2011-Jan 2012-Jan 2013-Jan 2014-Jan 2015-Jan 2016-Jan 2017-Jan Container Industry Container Timecharter Index (USD/day) Container Breakdown by Commodity Building Materials and Flooring Materials, Blinds and Other Related 160 Other Related Items. Plastic Products 140 6% 5% Automobile Parts 6% Telev ision, Video and Vision/Sound Effect Products 6% Computers and Furniture, Household Goods 29% Semiconductors 5% Containership Timecharter Rate Index Footw ears and Other Related Items 6% Toy s 5% General Electrical Appliances Clothing and Other Related Items 18% 14% 25 Source: Clarkson, OOCL, BofA Merrill Lynch Global Research estimates

26 Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 May-15 Sep-15 Jan-16 May-16 Sep-16 Jan-17 May-17 Sep-17 Air Cargo Data IATA IATA Annual Air Cargo Y-o-Y Changes 40.0% 30.0% 20.0% 10.0% 0.0% -10.0% -20.0% -30.0% Freight-Tonne-Kilometers (FTK), year-over-year growth 26 Source: International Air Transportation Association

27 Airfreight Domestic Express volume Y-Y Growth Domestic Express Yield 10.0% 20.0% 10.0% 0.0% 0.0% -10.0% -20.0% -10.0% -30.0% FDX UPS FDX UPS Recent FDX / UPS growth driven by e-commerce. US Postal Service price increases should support price power at FDX and UPS 27 Source: BofA Merrill Lynch Global Research estimates and Company reports.

28 State of the Airfreight industry Global addressable airfreight market is ~$383 billion (freight forwarding, int l cargo, small package) Package Related Revenues Are Approximately $195 billion (US small package + Int l Export + Int l Domestic) Domestic market growing will mirror GDP growth, low- to mid-single digits International market tied to global trade, particularly driven by emerging and developing economies Small Package industry is tied heavily to moving high-value goods: The Int l Air Transport Assn. (IATA) estimates 50% of goods moved by air are intermediate parts for manufacturing or capital equipment, including computers Was driven by fortunes of Automotive, Manufacturing, Durable Goods, and Retail (mail order) some of that displaced by containerized ocean cargo Ties heavily to the industrial economy 28

29 Industry size and growth Global market opportunity, $383 bil. Global Freight Fwding, $162.0 US LTL, $26.0 Int'l Domestic, $58.0 Int'l Export, $78.0 US small pkg, $59.0 Int l airfreight market growth slowing $ $ $ $20.0 $ $ Int'l Air Express Int'l Air Freight UPS estimates its global addressable market is ~$383 billion Of that, Int l Export ($78 bil.), US small package ($59 bil.) and Int l Domestic ($58 bil) combine to make up ~$195 bil. that can be touched by airfreight On the Int l airfreight side, the growth profile has slowed for both air express and air freight: Air express CAGR from was +14%, slowing to +7% from Similarly, air freight s CAGR slowed from +6% in to +1% in Source: FedEx and UPS company reports

30 On-line Retail is Growth Engine for Future Domestic Online Retail is forecast to grow over 4 times the rate of GDP 30 Source: UPS company reports, UPS Rates & Forecasting, emarketer, Forrester

31 Online sales growing significance US ecommerce sales expected to continue to grow, reaching 15% of retail sales by 2019 UPS notes that B2C represents nearly half of its moves Expected to increase to over half of parcel shipments over next few years 31 Source: Census Bureau, UPS company reports and BofAML Global Research

32 Issues Issues of the day E-commerce network shifts Impact of service Post Hurricane CSX s network overhaul Shift between Electric Vehicles (EV s) to Autonomous Cost currently 2x, but operational savings up to 50% From EVs to Platooning to Autonomous Rail CEO noted trucks evolving from EV to autonomous is significant threat to rail industry. Incumbent on Board & mgmt to produce analogous savings in rail industry 32 Source: BofA Merrill Lynch Global Research estimates and company reports.

33 Q06a 2Q07a 4Q07a 2Q08a 4Q08a 2Q09a 4Q09a 2Q10a 4Q10a 2Q11a 4Q11a 2Q12a 4Q12a 2Q13a 4Q13a Rail Service Metrics CSX vs. NSC 2, , , , CSX Velocity NSC Velocity FDX2017 UPS 10Y Max 10Y Min FDX2017 UPS 10Y Max 10Y Min % % % % % % CSX Dwell FDX (Ground) 2017 UPS 10Y Max 10Y Min Source: BofA Merrill Lynch Global Research estimates and company reports NSC Dwell FDX2017 UPS 10Y Max 10Y Min

34 Q06a Q07a 4Q07a 2Q08a 4Q08a 2Q09a 4Q09a 2Q10a 4Q10a 2Q11a 4Q11a 2Q12a 4Q12a 2Q13a 4Q13a Rail Service Metrics UNP vs. BNSF 2,500 2, , , UNP Velocity FDX2017 UPS 10Y Max 10Y Min BNSF Velocity FDX2017 UPS 10Y Max 10Y Min % % % % % % UNP Dwell FDX (Ground) 2017 UPS 10Y Max 10Y Min Source: BofA Merrill Lynch Global Research estimates and company reports BNSF Dwell FDX2017 UPS 10Y Max 10Y Min

35 Q06a Q07a 4Q07a 2Q08a 4Q08a 2Q09a 4Q09a 2Q10a 4Q10a 2Q11a 4Q11a 2Q12a 4Q12a 2Q13a 4Q13a Rail Service Metrics CNI vs. CP 2, , , , CNI Velocity FDX2017 UPS 10Y Max 10Y Min CP Velocity FDX2017 UPS 10Y Max 10Y Min % % % % % % 6.0 CNI Dwell FDX (Ground) 2017 UPS 10Y Max 10Y Min Source: BofA Merrill Lynch Global Research estimates and company reports CP Dwell FDX2017 UPS 10Y Max 10Y Min

36 Conclusion & Questions Underlying economy looks solid Intermodal/Metals/Chemicals/Paper/Forest Prod offset Grain/Coal/Autos? Rail volumes facing tougher positive comps in 4Q Will we see growth on growth and if so 2.5%+ Near term benefits on pricing and volumes from truck market tightness Structural competitive issues from truck market over medium term with shift to EVs and Autonomous trucking Timeframe of actual implementation can be different from investor perception which will impact valuations 36

37 Rail comps Railroads 10/04/17 Current Qtr4Q2017 EPS Inv. BofAML Share Price Shares Mkt Cap Net Debt EV BofAML Consensus BofAML BofAML Forward P/E EBITDA ($ bil) Forward EV/EBITDA Company Ticker Opinion Rating Price Obj Out. (mil.) ($ bil.) ($ bil.) ($ bil.) 2017e 2017e 2018e 2019e e 2018e e 2018e e 2018e Canadian National CNI A-2-7 NEUT $81.53 $ $61.2 $7.7 $68.8 $3.89 $4.06 $4.30 $ x 21.0x 19.0x x 12.9x 12.1x Canadian Pacific CP B-1-7 BUY $ $ $24.4 $6.5 $30.9 $8.95 $9.22 $10.15 $ x 18.6x 16.4x x 11.6x 10.7x CSX Corporation CSX B-1-7 BUY $51.69 $ $47.2 $11.4 $58.6 $2.25 $2.24 $2.65 $ x 23.0x 19.5x x 11.4x 10.5x Norfolk Southern NSC B-1-7 BUY $ $ $37.7 $8.9 $46.6 $6.45 $6.33 $7.15 $ x 20.3x 18.3x x 10.4x 9.8x Union Pacific UNP B-1-7 BUY $ $ $91.2 $13.9 $105.1 $5.87 $5.78 $6.50 $ x 19.4x 17.5x x 10.4x 9.7x Kansas City Southern KSU B-2-7 NEUT $ $ $11.3 $2.5 $13.7 $5.20 $5.21 $5.80 $ x 20.6x 18.5x x 11.1x 10.4x Genesee & Wyoming GWR B-1-9 BUY $73.31 $76 62 $4.6 $2.1 $6.7 $3.00 $3.00 $3.45 $ x 24.4x 21.2x x 9.8x 9.2x *avg excludes KSU and GWR 23.8x 20.5x 18.1x 12.3x 11.3x 10.6x 4Q2017 EPS est. to EPS Growth YoY Revenue Growth 2017 Op. Net Debt/ ROIC Total Return (w/reinvested dividends) Dividend Company BofAML Cons. Street 1yr 3yr 5yr 4Q2017 1yr 5yr Ratio EBITDA 1yr 1 week YTD 1yr 3yr 5yr Annual Yield Canadian National $1.00 $1.03-3% 11% 15% 14% -5% 5% 6% 56% 1.5x 11% -2% 22% 26% 7% 15% $ % Canadian Pacific $2.63 $2.62 0% 13% 32% 48% -7% 0% 4% 57% 2.4x 11% -1% 18% 11% -7% 15% $ % CSX Corporation $0.59 $0.58 2% 19% 0% 3% -6% 5% 0% 70% 2.2x 6% -4% 45% 74% 20% 22% $ % Norfolk Southern $1.59 $1.53 4% 12% -1% 3% -6% 1% -1% 69% 2.2x 6% -1% 23% 40% 8% 18% $ % Union Pacific $1.55 $1.51 2% 8% 3% 8% -9% 2% 1% 64% 1.5x 9% -2% 12% 21% 4% 16% $ % Kansas City Southern $1.32 $1.36-3% 7% 13% 133% -3% 5% 4% 66% 2.1x 7% -1% 27% 18% -3% 9% $ % Genesee & Wyoming $0.76 $0.81-6% -8% -20% -- 0% 2% 24% 81% 4.3x 4% 0% 6% 9% -7% 2% n/a n/a *avg excludes KSU and GWR 63% 2.0x 8% -2% 24% 34% 6% 17% 37 Source: BofA Merrill Lynch Global Research estimates, Bloomberg, and company reports.

38 Intermodal comps Intermodal/Container Lessors 10/04/17 Current Qtr 4Q2017 EPS Inv. BofAML Share Price Shares Mkt Cap Net Debt EV BofAML ConsensusBofAML BofAML Forward P/E EBITDA ($ bil) Forward EV/EBITDA Company Ticker Opinion Rating Price Obj Out. (mil.) ($ bil.) ($ bil.) ($ bil.) 2017e 2017e 2018e 2019e e 2018e e 2018e e 2018e J.B. Hunt Transport JBHT B-1-7 BUY $ $ $11.9 $0.9 $12.8 $3.75 $3.80 $4.55 $ x 29.1x 23.9x x 12.1x 10.2x Triton Int'l Ltd TRTN C-1-7 BUY $34.78 $42 80 $2.8 $6.5 $9.3 $2.50 $2.56 $3.45 $ x 13.9x 10.1x x 9.2x 7.8x Textainer Group TGH n/a n/a $17.50 n/a 57 $1.0 $2.9 $3.9 n/a $0.14 n/a n/a x 20.5x x 10.2x 8.5x Hub Group Inc HUBG n/a n/a $41.35 n/a 33 $1.4 $0.0 $1.5 n/a $1.54 n/a n/a 18.7x 26.9x 19.9x x 10.5x 8.5x CAI International CAI n/a n/a $30.26 n/a 19 $0.6 $1.4 $2.0 n/a $2.36 n/a n/a 36.2x 12.8x 9.3x x 9.2x 7.5x 41.7x 42.1x 16.7x 11.9x 10.2x 8.5x 4Q2017 EPS est. to EPS Growth YoY Revenue Growth 2017 Op. Net Debt/ ROIC Total Return (w/reinvested dividends) Dividend Company BofAML Cons. Street 1yr 3yr 5yr 4Q2017 1yr 5yr Ratio EBITDA 1yr 1 week YTD 1yr 3yr 5yr Annual Yield J.B. Hunt Transport $1.05 $1.07-1% 2% 10% 5% 6% 7% 7% 89% 0.9x 14% 0% 13% 35% 14% 16% $ % Triton Int'l Ltd $0.68 $0.74-8% -20% n/a 46% 19% 63% 19% 75% 7.5x 3% 8% 130% 169% 5% 9% $ % Textainer Group n/a $ % n/a n/a -8% -8% 0% 94% 10.7x n/a 6% 136% 127% -14% -7% n/a n/a Hub Group Inc n/a $ % 9% -4% 1% 8% 4% 97% 0.1x n/a -4% -5% 4% 1% 7% n/a n/a CAI International n/a $ % -44% 31% 18% 18% 16% 82% 8.2x n/a 4% 249% 260% 16% 6% n/a n/a 87% 5.5x 9% 3% 105% 119% 4% 6% 38 Source: BofA Merrill Lynch Global Research estimates, Bloomberg, and company reports.

39 LTL comps Less-than-Truckload (LTL) Carriers 10/04/17 Current Qtr4Q2017 EPS Inv. BofAML Share Price Shares Mkt Cap Net Debt EV BofAML ConsensusBofAML BofAML Forward P/E EBITDA ($ bil) Forward EV/EBITDA Company Ticker Opinion Rating Price Obj Out. (mil.) ($ bil.) ($ bil.) ($ bil.) 2017e 2017e 2018e 2019e e 2018e e 2018e e 2018e Arcbest Corp ARCB C-2-7 NEUT $33.70 $31 26 $0.9 $0.2 $1.0 $1.35 $1.32 $1.95 $ x 25.0x 17.3x x 6.8x 5.7x Old Dominion ODFL B-2-7 NEUT $ $ $9.0 $0.0 $9.0 $4.20 $4.15 $4.80 $ x 25.9x 22.7x x 11.7x 10.5x Saia Inc SAIA n/a n/a $61.58 n/a 25 $1.6 $0.1 $1.6 n/a $2.18 n/a n/a 32.4x 28.3x 22.4x x 9.1x 7.7x YRC Worldwide Inc YRCW n/a n/a $14.16 n/a 34 $0.5 $0.9 $1.3 n/a $0.73 n/a n/a 18.4x 19.3x 8.4x x 4.6x 3.9x 29.3x 24.6x 17.7x 9.2x 8.0x 6.9x 4Q2017 EPS est. to EPS Growth YoY Revenue Growth 2017 Op. Net Debt/ ROIC Total Return (w/reinvested dividends) Dividend Company BofAML Cons. Street 1yr 3yr 5yr 4Q2017 1yr 5yr Ratio EBITDA 1yr 1 week YTD 1yr 3yr 5yr Annual Yield Arcbest Corp $0.45 $ % 9% 43% 44% 1% 4% 7% 98% 0.7x 2.7% 2% 23% 72% -1% 35% $ % Old Dominion $1.04 $1.00 4% 9% 15% 17% 1% 5% 9% 84% 0.1x 13.6% 0% 27% 58% 16% 30% $ % Saia Inc n/a $ % 3% 10% 0% 7% 5% 94% 0.9x n/a 0% 40% 108% 7% 34% n/a n/a YRC Worldwide Inc n/a $ % n/a n/a -3% 2% 0% 97% 3.0x n/a 4% 6% 13% -10% 16% n/a n/a 93% 1.2x 8.1% 1% 24% 63% 3% 29% 39 Source: BofA Merrill Lynch Global Research estimates, Bloomberg, and company reports.

40 Truckload comps Truckload (TL) Carriers 10/04/17 Current Qtr4Q2017 EPS Inv. BofAML Share Price Shares Mkt Cap Net Debt EV BofAML ConsensusBofAML BofAML Forward P/E EBITDA ($ bil) Forward EV/EBITDA Company Ticker Opinion Rating Price Obj Out. (mil.) ($ bil.) ($ bil.) ($ bil.) 2017e 2017e 2018e 2019e e 2018e e 2018e e 2018e Knight Transportation KNX B-1-7 BUY $40.30 $ $7.2 $0.6 $7.8 $1.35 $1.23 $1.85 $ x 29.9x 21.8x x 21.8x 11.5x Schneider National SNDR C-1-7 BUY $24.81 $26 94 $4.4 $0.5 $4.9 $0.95 $0.94 $1.07 $ x 26.1x 23.2x x 8.7x 7.6x Werner Enterprises WERN B-2-7 NEUT $35.63 $35 72 $2.6 $0.1 $2.6 $1.20 $1.24 $1.50 $ x 29.7x 23.8x x 7.4x 6.6x Celadon Group CGI n/a n/a $5.95 n/a 28 $0.2 $0.4 $0.6 n/a -$0.26 n/a n/a 6.0x x x 10.1x 6.7x Covenant Transport CVTI n/a n/a $27.70 n/a 16 $0.5 $0.2 $0.7 n/a $0.71 n/a n/a 30.3x 39.1x 25.0x x 6.7x 5.9x Heartland Express HTLD n/a n/a $24.03 n/a 83 $2.0 -$0.1 $1.9 n/a $0.69 n/a n/a 36.0x 34.9x 27.5x x 9.7x 8.0x Marten Transport MRTN n/a n/a $19.85 n/a 55 $1.1 $0.0 $1.1 n/a $0.63 n/a n/a 32.4x 31.6x 26.5x x 7.6x 6.9x Pam Transport PTSI n/a n/a $24.18 n/a 6 $ n/a $0.85 n/a n/a 13.8x 28.4x 20.2x Universal Logistics ULH n/a n/a $20.88 n/a 28 $0.6 $0.2 $0.8 n/a $0.72 n/a n/a 24.1x 29.2x 20.4x x 9.9x 7.8x USA Truck Inc USAK n/a n/a $14.15 n/a 8 $0.1 $0.1 $0.3 n/a -$0.58 n/a n/a 471.7x x x 10.3x 6.4x 70.6x 31.1x 25.0x 10.3x 10.2x 7.5x 4Q2017 EPS est. to EPS Growth YoY Revenue Growth 2017 Op. Net Debt/ ROIC Total Return (w/reinvested dividends) Dividend Company BofAML Cons. Street 1yr 3yr 5yr 4Q2017 1yr 5yr Ratio EBITDA 1yr 1 week YTD 1yr 3yr 5yr Annual Yield Knight Transportation $0.45 $0.45 0% -33% 1% 2% -5% -3% 3% 86% 1.9x 9.0% -2% 19% 37% 11% 26% n/a n/a Schneider National $0.31 $0.32-2% -- 18% -- 2% % 0.0x 7.8% 0% 0% $ % Werner Enterprises $0.38 $0.38 0% -21% 2% -1% -4% 0% 0% 94% 0.2x 5.7% -1% 33% 52% 14% 12% $ % Celadon Group n/a ($0.11) -- -5% n/a 18% 3% 14% 95% 4.2x n/a -13% -17% -31% -33% -17% $ % Covenant Transport n/a $ % 91% 10% n/a n/a n/a n/a 2.0x n/a 2% 43% 49% 14% 44% n/a n/a Heartland Express n/a $0.19-9% -5% -1% -17% -19% 3% 86% -0.9x n/a 3% 18% 30% 1% 14% $ % Marten Transport n/a $0.16-3% 5% 5% 1% 3% 2% 91% -0.1x n/a 1% 42% 58% 23% 25% $ % Pam Transport n/a $ % 60% 48% 4% 3% 3% 95% -- n/a 5% -7% 16% -14% 22% n/a n/a Universal Logistics n/a $ % -19% -22% -5% 2% 3% 96% 3.2x n/a 1% 30% 61% -4% 7% $ % USA Truck Inc n/a $ n/a n/a -16% -10% -3% 102% 8.1x n/a 12% 63% 42% -6% 32% n/a n/a 93% 2.1x 7.5% 40 Source: BofA Merrill Lynch Global Research estimates, Bloomberg, and company reports.

41 Important Disclosures FUNDAMENTAL EQUITY OPINION KEY: Opinions include a Volatility Risk Rating, an Investment Rating and an Income Rating. VOLATILITY RISK RATINGS, indicators of potential price fluctuation, are: A - Low, B - Medium and C - High. INVESTMENT RATINGS reflect the analyst s assessment of a stock s: (i) absolute total return potential and (ii) attractiveness for investment relative to other stocks within its Coverage Cluster (defined below). There are three investment ratings: 1 - Buy stocks are expected to have a total return of at least 10% and are the most attractive stocks in the coverage cluster; 2 - Neutral stocks are expected to remain flat or increase in value and are less attractive than Buy rated stocks and 3 - Underperform stocks are the least attractive stocks in a coverage cluster. Analysts assign investment ratings considering, among other things, the 0-12 month total return expectation for a stock and the firm s guidelines for ratings dispersions (shown in the table below). The current price objective for a stock should be referenced to better understand the total return expectation at any given time. The price objective reflects the analyst s view of the potential price appreciation (depreciation). Investment rating Total return expectation (within 12-month period of date of initial rating) Ratings dispersion guidelines for coverage cluster* Buy 10% 70% Neutral 0% 30% Underperform N/A 20% * Ratings dispersions may vary from time to time where BofA Merrill Lynch Research believes it better reflects the investment prospects of stocks in a Coverage Cluster. INCOME RATINGS, indicators of potential cash dividends, are: 7 - same/higher (dividend considered to be secure), 8 - same/lower (dividend not considered to be secure) and 9 - pays no cash dividend. Coverage Cluster is comprised of stocks covered by a single analyst or two or more analysts sharing a common industry, sector, region or other classification(s). A stock s coverage cluster is included in the most recent BofA Merrill Lynch Comment referencing the stock. 41

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44 Important Disclosures FUNDAMENTAL EQUITY OPINION KEY: Opinions include a Volatility Risk Rating, an Investment Rating and an Income Rating. VOLATILITY RISK RATINGS, indicators of potential price fluctuation, are: A - Low, B - Medium and C - High. INVESTMENT RATINGS reflect the analyst s assessment of a stock s: (i) absolute total return potential and (ii) attractiveness for investment relative to other stocks within its Coverage Cluster (defined below). There are three investment ratings: 1 - Buy stocks are expected to have a total return of at least 10% and are the most attractive stocks in the coverage cluster; 2 - Neutral stocks are expected to remain flat or increase in value and are less attractive than Buy rated stocks and 3 - Underperform stocks are the least attractive stocks in a coverage cluster. Analysts assign investment ratings considering, among other things, the 0-12 month total return expectation for a stock and the firm s guidelines for ratings dispersions (shown in the table below). The current price objective for a stock should be referenced to better understand the total return expectation at any given time. The price objective reflects the analyst s view of the potential price appreciation (depreciation). Investment rating Total return expectation (within 12-month period of date of initial rating) Ratings dispersion guidelines for coverage cluster* Buy 10% 70% Neutral 0% 30% Underperform N/A 20% * Ratings dispersions may vary from time to time where BofA Merrill Lynch Research believes it better reflects the investment prospects of stocks in a Coverage Cluster. INCOME RATINGS, indicators of potential cash dividends, are: 7 - same/higher (dividend considered to be secure), 8 - same/lower (dividend not considered to be secure) and 9 - pays no cash dividend. Coverage Cluster is comprised of stocks covered by a single analyst or two or more analysts sharing a common industry, sector, region or other classification(s). A stock s coverage cluster is included in the most recent BofA Merrill Lynch report referencing the stock. 44

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