Truck Stop/TLSS: Typical Mid- Summer Slowdown

Transcription

1 August 1, :01 AM GMT Freight Transportation Truck Stop/TLSS: Typical Mid- Summer Slowdown Overall current and forward measures decreased during this update, consistent with historical trends, yet remain at elevated levels. 58% of respondents expect ~10%+ y/y rate increase in 2018 on average, and commentary suggests rates have not come down meaningfully despite the relative loosening. Overall current and forward sentiment decreased from our previous survey, directionally consistent with historical trends. Respondents' expectations for 2018 TL rates (ex. fuel) decelerated to ~6.7% y/y on average vs. ~7% in our prior update. 58% of respondents expect 2018 rates to increase at least +4% y/y, and among those respondents the average anticipated rate increase was ~10%, flat from our prior survey's ~9.9%. Respondents' commentary suggests this is merely the normal seasonal loosening, but it is not expected to last long as the next pain point is likely to be the week leading up to Labor Day. Respondents also note that while some softness was felt in several markets, rates have not come down meaningfully and seem to have flattened out at elevated levels. Exhibit 1: Current and 3-month forward demand, supply and rate sentiment vs. seasonality MS TL Sentiment Survey Current vs. Seasonality 3-Mo. Fwd vs. Seasonality MORGAN STANLEY & CO. LLC Ravi Shanker EQUITY ANALYST Diane Huang EQUITY ANALYST Shaked Atia RESEARCH ASSOCIATE Freight Transportation North America IndustryView Select quotes from our survey In-Line "After a few weeks of a seasonal pause, you can see and feel the market starting to seize up again. Dedicated opportunities continue to be abundant which continues to reduce capacity within the one-way market." (Carrier) "A little breathing room towards the end of Produce season, but probably won't last long." (Shipper) "We are experiencing the normal seasonal loosening in capacity, but expect the market to tighten again in early Autumn. Any disruption in freight flow such as a hurricane will quickly accelerate the market for the remainder of the calendar year." (Broker/Other) Please see all charts in This Week's Key Charts Previous Truck Stop Report: Truck Stop/TLFI: Index Normalizes Consistent with Seasonality (25 Jul 2018) TL Demand TL Supply TL Rates Source: Morgan Stanley Research Here are our main takeaways from this week's update: Demand: Current and 3-month demand sentiment decreased sequentially, and underperformed seasonality. The current strong/weak demand spread decreased ~690 bps sequentially, ~200 bps below normal seasonality. The forward spread decreased ~350 bps sequentially, ~50 bps below the typical ~310 bps decrease during this update. Supply: Current and 3-month supply sentiment underperformed seasonality. The current tight/abundant supply spread decreased ~850 bps sequentially relative to an average ~480 bps decrease during this Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision. For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report. 1

2 update, while the forward spread decreased ~360 bps sequentially vs. its ~310 bps decrease seasonal benchmark. Rates: Current rate sentiment underperformed seasonality, while 3-month forward rate sentiment outperformed. Current rate sentiment decreased ~70 bps sequentially vs. a flat seasonal benchmark. Forward rates decreased ~90 bps sequentially vs. an average ~240 bps decrease. Separately, July DAT dry van TL spot and contract rates (ex. fuel) outperformed seasonality. Spot rates increased ~26% y/y in July, or down ~1% sequentially, while contract rates increased ~16% y/y, or up 1% sequentially. ITS market demand increased ~54% y/y in July, decelerating from June s ~100% y/y growth. The ITS rate ex. fuel increased 21% y/y on average during July. 2

3 Truckload Industry Report Summary Exhibit 2: Truckload Industry Report Summary Latest Data Release Date Truck Data Points YoY % Chg Seq % Chg 6/30/2018 7/3/2018 ACT Class 8 Prelim. Orders 133.1% 18.1% 6/30/2018 7/24/2018 ATA NSA Truck Tonnage 8.0% -1.1% 6/30/2018 7/18/2018 Cass Indices Freight Expenditures 15.9% 0.7% Freight Shipments 7.2% -4.6% Vs. 7/24/2018 7/24/2018 MS Truckload Freight Index Seq. Move Seasonality Dry Van Reefer Flatbed 7/31/2018 7/31/2018 MS TL Sentiment Survey Source: Morgan Stanley Research TL Demand TL Supply TL Rates Current Seq. Move 3-Mo. Fwd Seq. Move 3

4 This Week's Key Charts Exhibit 3: What is your appraisal of current TL demand? Response % Pt. Spread (Strong - Weak) Demand Stronger Avg ( ) 1-Jan 15-Jan 29-Jan 12-Feb 26-Feb 12-Mar 26-Mar 9-Apr 23-Apr 7-May 21-May 4-Jun 18-Jun 2-Jul 16-Jul 30-Jul 13-Aug 27-Aug 10-Sep 24-Sep 8-Oct 22-Oct 5-Nov 19-Nov 3-Dec 17-Dec 31-Dec Source: Morgan Stanley Research; Note: Response % Pt. Spread defined as the % of respondents describing current demand as strong less the % of respondents describing current demand as weak Exhibit 4: What is your appraisal of current TL supply? Response % Pt. Spread (Tight- Abundant) Supply Tighter Avg ( ) 1-Jan 15-Jan 29-Jan 12-Feb 26-Feb 12-Mar 26-Mar 9-Apr 23-Apr 7-May 21-May 4-Jun 18-Jun 2-Jul 16-Jul 30-Jul 13-Aug 27-Aug 10-Sep 24-Sep 8-Oct 22-Oct 5-Nov 19-Nov 3-Dec 17-Dec 31-Dec Source: Morgan Stanley Research; Note: Response % Pt. Spread defined as the % of respondents describing current supply as tight less the % of respondents describing current supply as abundant 4

5 Exhibit 5: How do your current TL rates compare to your rates 1 year ago? Response % Pt. Spread (Higher- Lower) Rates Higher Avg ( ) 1-Jan 15-Jan 29-Jan 12-Feb 26-Feb 12-Mar 26-Mar 9-Apr 23-Apr 7-May 21-May 4-Jun 18-Jun 2-Jul 16-Jul 30-Jul 13-Aug 27-Aug 10-Sep 24-Sep 8-Oct 22-Oct 5-Nov 19-Nov 3-Dec 17-Dec 31-Dec Source: Morgan Stanley Research; Note: Response % Pt. Spread defined as the % of respondents saying current TL rates are Higher vs. a year ago less the % of respondents saying current TL rates are Lower vs. a year ago Exhibit 6: Current TL Demand Sentiment Seq. Pt. Chg. vs. Historical Average 2018 TL Current Demand Strong/Weak Spread Seq. Pt. Chg. Less Hist. Avg. Seq. Pt. Chg Source: Morgan Stanley Research TL Current Demand Seq Pt. Change - Hist. Avg. YTD Avg Update Exhibit 7: 3 Month TL Demand Sentiment Seq. Pt. Chg. vs. Historical Average 2018 TL 3M Exp. Demand Strong/Weak Spread Seq. Pt. Chg. Less Hist. Avg. Seq. Pt. Chg TL 3M Exp. Demand Seq Pt. Change - Hist. Avg. YTD Avg Update Source: Morgan Stanley Research Exhibit 8: Current TL Supply Sentiment Seq. Pt. Chg. vs. Historical Average 2018 TL Current Supply Tight/Abundant Spread Seq. Pt. Chg. Less Hist. Avg. Seq. Pt. Chg Source: Morgan Stanley Research TL Current Supply Seq Pt. Change - Hist. Avg. YTD Avg Update Exhibit 9: 3 Month TL Supply Sentiment Seq. Pt. Chg. vs. Historical Average 2018 TL 3M Exp. Supply Tight/Abundant Spread Seq. Pt. Chg. Less Hist. Avg. Seq. Pt. Chg Source: Morgan Stanley Research TL 3M Exp. Supply Seq Pt. Change - Hist. Avg. YTD Avg Update 5

6 Exhibit 10: Current TL Rate Sentiment Seq. Pt. Chg. vs. Historical Average 2018 TL Current Rate Higher/Lower Spread Seq. Pt. Chg. Less Hist. Avg. Seq. Pt. Chg Source: Morgan Stanley Research TL Current Rate Seq Pt. Change - Hist. Avg. YTD Avg Update Exhibit 11: 3 Month TL Rate Sentiment Seq. Pt. Chg. vs. Historical Average 2018 TL 3M Exp. Rate Higher/Lower Spread Seq. Pt. Chg. Less Hist. Avg. Seq. Pt. Chg Source: Morgan Stanley Research TL 3M Exp. Rate Seq Pt. Change - Hist. Avg. YTD Avg Update Exhibit 12: What is your expectation for 2018 TL rate increases ex. FS? 70% 2018 TL Rate ex. FS Increase - % of Respondents 60% 50% 40% 30% 20% 10% 0% Down Down 3- more than 4% YoY 4% YoY Down 2-3% YoY Down 1-2% YoY -1% to +1% YoY Up 1-2% YoY Up 2-3% YoY Up 3-4% YoY Avg 6.65% Up more than 4% YoY Source: Morgan Stanley Research; Note: Based on ~400 responses from shippers, carriers, and brokers Exhibit 13: Average TL Rate ex. FS Expectation Time Series Avg. TL Rate ex. FS Incr. 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% -1.0% /27/15 12/01/15 01/05/16 02/09/16 03/15/16 04/19/16 05/24/16 06/28/16 08/02/16 09/06/16 10/11/16 11/15/16 12/20/16 01/24/17 02/28/17 04/04/17 05/09/17 06/13/17 07/18/17 08/22/17 09/26/17 10/31/17 12/05/17 01/09/18 02/13/18 03/20/18 04/24/18 05/29/18 07/03/18 Source: Morgan Stanley Research; Note: Based on ~400 responses from shippers, carriers and brokers; Note: Lack of data point in October 2016 resulted from technical difficulty in data collection process. *Starting Jan 2, 2018 we changed the +4% response in our average calculation from a flat 4% to a precise number indicated by responses 6

7 Exhibit 14: Average TL rate ex. FS expectation of respondents who chose +4%+ 10.5% Average 2018 Rate Inc. Expectations (of those who chose +4%) 10.0% 9.5% 9.0% 8.5% 8.0% 7.5% Source: Morgan Stanley Research; Truck Stop Pulse Representative commentary provided by respondents between 7/24/18 and 7/31/18: 7

8 Exhibit 15: MS Truckload Sentiment Survey (TLSS) Respondent Commentary CARRIERS SHIPPERS BROKERS / OTHER After a few weeks of a seasonal pause, you can see and feel the market starting to seize up again. Dedicated opportunities continue to be abundant which continues to reduce capacity within the oneway market. Economy remains strong. Driver pay and benefits continue to make filling trucks better. A little breathing room towards the end of Produce season, but probably won't last long. As of late July, we are starting to see some carriers accepting tenders more readily, but most days are still challenging to get full award acceptance. Securing incremental capacity, whether OTR or intermodal is even more difficult, especially in the Southeast region and into Florida. We are experiencing the normal seasonal loosening in capacity, but expect the market to tighten again in early Autumn. Any disruption in freight flow such as a hurricane will quickly accelerate the market for the remainder of the calendar year. Starting to slowly find more of an equilibrium. Unsure as to how the retail peaks (and the potential importing of extra goods from China ahead of tariffs) will disrupt the market again. Normal flatbed soft summer market is still going strong. Spot rates are flattening out at high levels. Continue to experience tight market in all modes; LTL even backing up and refusing loads. Feeling some relief in capacity - rates remain elevated. Reefer rates continue to move up-- Flatbed rates continue to move up -- tanker rates continue to move up- Year over year we're up about 11 % more in specific areas. Broker trucks are definitely diminished with elog mandates. Seeing slower demand in the typical July lull, and higher number of drivers taking longer vacations in July after pay rates have increased. Flatbed market appears to have stopped tightening further; however, capacity remains constricted and pricing has yet to decline in any significant fashion. Until more drivers become available, this would appear to be the new normal as long as the economy stays relatively strong. Has eased a bit post 4th of July and quarter end. Expect next extreme pain point to be week leading up to Labor Day. Capacity has seemed to loosen up in the market. My hope is this continues throughout the rest of the 2nd half of the year. Prices are sticky downward as the market has slightly over adjusted as it was long overdue. Spot market softening, although still well above any past levels. Still overbooked by a factor daily and well in advance. Brokerage capacity still very tight, but not as tight as it was a month ago. Reefer market still very tight. Fall peak in reefer Midwest should shove us back over the top again. Capacity has loosend up after the July 4 holiday as expected. Things are loosening for dry vans coming out of the peak summer months. We're having to rely less on the spot market and, when we do go to the spot market, rates are coming back to earth a bit. We believe we're on the way down. Time to see what the new floor will be. We're going backwards on our driver seated count. Higher rates and driver pay will be needed to attract more people to the profession. Demand must be softening a little. We have had 10 days of more truck offers than loads to ship. We have not seen that for about a year. Source: Morgan Stanley Research; Note: Green = Optimistic, Orange = Neutral, Red = Bearish 8

9 ACT NA Total Class 8 Net Orders, Builds & Retail Sales Trends Exhibit 16: NA Total Cl. 8 Net Orders Long-Term Trends 350% 300% 250% YoY % Change in NA Cl.8 Net Orders - LHS NA Cl.8 Net Orders - RHS 12 per. Mov. Avg. (NA Cl.8 Net Orders - RHS) 200% 150% 100% 50% 0% -50% -100% Source: ACT, Morgan Stanley Research 60,000 50,000 40,000 30,000 20,000 10,000 0 Exhibit 17: LTM NA Total Cl. 8 Net Orders Source: ACT, Morgan Stanley Research Exhibit 18: Prelim. Cl. 8 Net Orders vs. 12M Mov. Avg. 25,000 20,000 15,000 10,000 5, ,000-10,000-15,000-20, Source: ACT, Morgan Stanley Research Exhibit 19: NA Total Cl. 8 Builds Long-Term Trends Exhibit 20: NA Total Cl. 8 Retail Sales Long-Term Trends 120% 100% 80% 60% 40% 20% YoY % Change in NA Cl.8 Build - LHS NA Cl.8 Build - RHS 12 per. Mov. Avg. (NA Cl.8 Build - RHS) 40,000 35,000 30,000 25,000 20, % 80% 60% 40% 20% YoY % Change in NA Cl.8 Retail Sales - LHS NA Cl.8 Retail Sales - RHS 12 per. Mov. Avg. (NA Cl.8 Retail Sales - RHS) 40,000 35,000 30,000 25,000 20,000 0% -20% -40% -60% 15,000 10,000 5,000 0% -20% -40% 15,000 10,000 5,000-80% % Source: ACT, Morgan Stanley Research Source: ACT, Morgan Stanley Research 9

10 ATA NSA Truck Tonnage Index Trends & Straight-Line Forecast Exhibit 21: Straight-Line Forecast for Monthly YoY % Change in NSA Truck Tonnage Index Source: ATA, Morgan Stanley Research; Note: We have adjusted February 2012 data due to the extra workday resulting from leap year Exhibit 22: Sequential Change in NSA Tonnage Index Exhibit 23: Straight-Line Forecast for LTM NSA Tonnage Index Source: ATA, Morgan Stanley Research; Note: Based on data from 1985 onwards; We have adjusted February data due to the extra workday resulting from leap year Source: ATA, Morgan Stanley Research; Note: We have adjusted February data due to the extra workday resulting from leap year Exhibit 24: NSA Tonnage Index Long-Term Trends Exhibit 25: Acceleration in LTM NSA Tonnage Index Source: ATA, Morgan Stanley Research; Note: We have adjusted February data due to the extra workday resulting from leap year Source: ATA, Morgan Stanley Research; Note: +1/-1 St. Dev. lines based on data from 1985 onwards; We have adjusted February data due to the extra workday resulting from leap year 10

11 Cass Shipment Index Trends & Straight-Line Forecast Exhibit 26: Straight-Line Forecast for Monthly YoY % Change in Cass Shipment Index 25% 20% 15% 10% 5% 90% Confidence Interval Avg 90% Confidence Interval 3.2% 1.9% 0.9% 4.0% 7.1% 4.8% 12.5% 11.4% 11.9% 11.9% 10.2% 6.3% 7.2% 7.2% 7.2% 8.2% 6.4% 3.9% 3.2% 2.9% 4.0% 2.9% 1.4% 0% -5% -10% Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Source: Cass Freight Index, Morgan Stanley Research -1.4% Exhibit 27: Sequential Change in Cass Shipment Index Exhibit 28: Straight-Line Forecast for LTM Cass Shipment Index 12% 10% 8% 6% 4% 2% 0% -2% -4% YoY % Change in Cass Shipment Index (Rolling 12-Month Avg ) 90% Confidence Interval Avg 90% Confidence Interval Source: Cass Freight Index, Morgan Stanley Research Source: Cass Freight Index, Morgan Stanley Research Exhibit 29: Cass Shipment Index Long-Term Trends Exhibit 30: Acceleration in LTM Cass Shipment Index Source: Cass Freight Index, Morgan Stanley Research Source: Cass Freight Index, Morgan Stanley Research 11

12 Cass Expenditure Index Trends & Straight-Line Forecast Exhibit 31: Straight-Line Forecast for Monthly YoY % Change in Cass Expenditure Index Source: Cass Freight Index, Morgan Stanley Research Exhibit 32: Sequential Change in Cass Expenditure Index Exhibit 33: Straight-Line Forecast for LTM Cass Expenditure Index 10% 5% 0% -5% -10% Current Average +/- 1 Std. Source: Cass Freight Index, Morgan Stanley Research Source: Cass Freight Index, Morgan Stanley Research Exhibit 34: Cass Expenditure Index Long-Term Trends Exhibit 35: Acceleration in LTM Cass Expenditure Index Source: Company data, Morgan Stanley Research Source: Cass Freight Index, Morgan Stanley Research 12

13 Internet Truckstop Exhibit 36: Market Demand Index Long-Term Trends 220% 180% 140% 100% 60% 20% -20% -60% YoY % Change (LHS) Internet Truck Stop Market Demand Index 12 per. Mov. Avg. (Internet Truck Stop Market Demand Index) Exhibit 37: Van Rate ex. Fuel Long-Term Trends 30% YoY % Change 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% Internet Truckstop Dry Van Rate per Mile (ex. FS) 12 per. Mov. Avg. (Internet Truckstop Dry Van Rate per Mile (ex. FS)) Source: Morgan Stanley Research, Internet Truckstop, Bloomberg; Note: ITS developed a new methodology in Nov and restated data back to January 2014; we calculate monthly demand as the average of weekly Internet Truckstop data points Source: Source: Morgan Stanley Research, Internet Truckstop, Bloomberg; Note: ITS uses a 30-day average posted rate to Carriers for the top 39k lanes and also includes temperature controlled and flatbed equipment in van rate ex. fuel 13

14 DAT Trendline Rates Exhibit 38: National Average Spot Van Rates ex. Fuel Surcharge DAT National Average Spot Van Rates $2.30 $2.10 $1.90 $1.70 $1.50 $1.30 $ Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Source: Morgan Stanley Research, DAT Solutions ( Note: DAT sources from over $24 B in transactions and 65k lanes Exhibit 39: National Average Contract Van Rates ex. Fuel Surcharge DAT National Average Contractual Van Rates $2.20 $2.10 $2.00 $1.90 $1.80 $1.70 $1.60 $ Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Exhibit 40: National Average Spot Reefer Rates ex. Fuel Surcharge DAT National Average Spot Reefer Rates $2.50 $2.30 $2.10 $1.90 $1.70 $1.50 $ Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Exhibit 41: National Average Contract Reefer Rates ex. Fuel Surcharge DAT National Average Contractual Reefer Rates $2.50 $2.40 $2.30 $2.20 $2.10 $2.00 $1.90 $1.80 $1.70 $1.60 $ Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 14

15 Exhibit 42: National Average Spot Flatbed Rates ex. Fuel Surcharge DAT National Average Spot Flatbed Rates $2.60 $2.40 $2.20 $2.00 $1.80 $1.60 $1.40 $ Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Exhibit 43: National Average Contract Flatbed Rates ex. Fuel Surcharge DAT National Average Contractual Flatbed Rates $2.50 $2.40 $2.30 $2.20 $2.10 $2.00 $1.90 $1.80 $ Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 15

16 DAT Contract vs. Spot Rate Spread Trends Exhibit 44: Van Rate Spread (Contract - Spot) Van Rate Spread (Contract - Spot) $0.40 $0.35 $0.30 $0.25 $0.20 $0.15 $0.10 $0.05 $0.00 -$ $0.10 -$0.15 Exhibit 45: Reefer Rate Spread (Contract - Spot) Reefer Rate Spread (Contract - Spot) $0.40 $0.30 $0.20 $0.10 $0.00 -$0.10 -$0.20 -$ Exhibit 46: Flatbed Rate Spread (Contract - Spot) Flatbed Rate Spread (Contract - Spot) $0.35 $0.30 $0.25 $0.20 $0.15 $0.10 $0.05 $0.00 -$0.05 -$

17 DAT TL Rates Long-Term Trends Exhibit 47: Van Spot Rate ex. FS Long-term Trend Exhibit 48: Van Contract Rate ex. FS Long-term Trend Exhibit 49: Reefer Spot Rate ex. FS Long-term Trend Exhibit 50: Reefer Contract Rate ex. FS Long-term Trend Exhibit 51: Flatbed Spot Rate ex. FS Long-term Trend Exhibit 52: Flatbed Contract Rate ex. FS Long-term Trend 17

18 DAT TL Rates ex. Fuel Surcharge Seasonality Exhibit 53: Sequential Change in Van Spot Rates (ex. FS) Exhibit 54: Sequential Change in Van Contract Rates (ex. FS) Exhibit 55: Sequential Change in Reefer Spot Rates (ex. FS) Exhibit 56: Sequential Change in Reefer Contract Rates (ex. FS) 18

19 Exhibit 57: Sequential Change in Flatbed Spot Rates (ex. FS) Exhibit 58: Sequential Change in Flatbed Contract Rates (ex. FS) 19

20 MS Truckload Freight Index Exhibit 59: Morgan Stanley Dry Van ONLY Truckload Freight Index Average* Straight Line Analysis 6 Through July Jan 24-Jan 14-Feb 7-Mar 28-Mar 18-Apr 9-May 30-May 20-Jun 11-Jul 1-Aug 22-Aug 12-Sep 3-Oct 24-Oct 14-Nov 5-Dec 26-Dec The index measures the incremental demand for Dry-Van Truckload services compared to the incremental supply. When a given reading is above prior years level, it means there is more freight demand relative to available capacity. When a given reading is below prior years level, it means there is less freight demand relative to capacity. * average trend line excludes financial crisis years of 2008 and 2009 Exhibit 60: YoY % Change in Public TL Carrier Pricing & Utilization vs. YoY Pt. Chg in TLFI 8 Year-over-year Point Change in TLFI Year-over-year Point change in TL Freight Index Revenue Per Tractor (Excl. Fuel Surcharge) Revenue Per Loaded Mile (Excl. Fuel Surcharge) 1Q1996 4Q1996 3Q1997 2Q1998 1Q1999 4Q1999 3Q2000 2Q2001 1Q2002 4Q2002 3Q2003 2Q2004 1Q2005 4Q2005 3Q2006 2Q2007 1Q2008 4Q2008 3Q2009 2Q2010 1Q2011 4Q2011 3Q2012 2Q2013 1Q2014 4Q2014 3Q2015 2Q2016 1Q2017 4Q2017 Revenue per Loaded Mile and Revenue Per Tractor calculated as an average sample of public carriers: KNX, JBHT (JBT Div. Only), SWFT, WERN, USAK, MRTN, PTSI, CVTI, and CLDN; Source: Morgan Stanley Research 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% -12% -14% Avg Year-over-year % Chg for Public Carriers 20

21 Dry Van TLFI Exhibit 61: Morgan Stanley Dry Van Truckload Freight Index Source: Morgan Stanley Research; * average trend line excludes financial crisis years of 2008 and

22 Flatbed TLFI Exhibit 62: Morgan Stanley Flatbed Truckload Freight Index Source: Morgan Stanley Research; * average trend line excludes financial crisis years of 2008 and

23 Reefer TLFI Exhibit 63: Morgan Stanley Reefer Truckload Freight Index Source: Morgan Stanley Research; * average trend line excludes financial crisis years of 2008 and

24 Morgan Stanley Truckload Sentiment Survey Exhibit 64: Current TL Demand, Supply & Rate Sentiment % Pt. Spread (Bullish - Bearish) Curr. Demand Curr. Supply Curr. Rates 10/1/10 1/1/11 4/1/11 7/1/11 10/1/11 1/1/12 4/1/12 7/1/12 10/1/12 1/1/13 4/1/13 7/1/13 10/1/13 1/1/14 4/1/14 7/1/14 10/1/14 1/1/15 4/1/15 7/1/15 10/1/15 1/1/16 4/1/16 7/1/16 10/1/16 1/1/17 4/1/17 7/1/17 10/1/17 1/1/18 4/1/18 7/1/18 Response % Pt. Spread (Bullish - Bearish) for TL Demand, Supply and Rates defined as: TL Demand the % of respondents describing demand as strong less the % describing demand as weak ; TL Supply the % of respondents describing supply as tight less the % describing supply as abundant ; TL Rates the % of respondents saying TL rates are Higher YoY less the % saying TL rates are Lower YoY. Source: Morgan Stanley Research Exhibit 65: 3 Mo. Forward TL Demand, Supply & Rate Sentiment % Pt. Spread (Bullish - Bearish) Fwrd. Demand Fwrd. Supply Fwrd. Rates 10/1/10 1/1/11 4/1/11 7/1/11 10/1/11 1/1/12 4/1/12 7/1/12 10/1/12 1/1/13 4/1/13 7/1/13 10/1/13 1/1/14 4/1/14 7/1/14 10/1/14 1/1/15 4/1/15 7/1/15 10/1/15 1/1/16 4/1/16 7/1/16 10/1/16 1/1/17 4/1/17 7/1/17 10/1/17 1/1/18 4/1/18 7/1/18 See Note to the left. Source: Morgan Stanley Research Exhibit 66: Latest MS Truckload Sentiment Survey Results 100% Current Sentiment Expectation in 3 Mo. % of Respondents 75% 50% 25% 0% 64% 74% 75% 76% 75% 93% 32% 24% 22% 22% 22% 7% 2% 3% 0% 2% 3% 4% Demand Supply Rates Demand Supply Rates Negative Neutral Positive Negative, Neutral and Positive responses or TL Demand, Supply and Rate trends correspond with: the % of respondents describing current and 3 Mo. forward Demand as Weak, Neutral and Strong ; the % of respondents describing current and 3 Mo. forward Supply as Abundant, Neutral and Tight ; and the % respondents describing current and 3 Mo. forward rates as Lower, Unchanged and Higher vs. a year ago, respectively. Source: Morgan Stanley Research Truck Stop Pulse Representative commentary provided by respondents between 7/24/18 and 7/31/18: 24

25 Exhibit 67: MS Truckload Sentiment Survey (TLSS) Respondent Commentary CARRIERS SHIPPERS BROKERS / OTHER After a few weeks of a seasonal pause, you can see and feel the market starting to seize up again. Dedicated opportunities continue to be abundant which continues to reduce capacity within the oneway market. Economy remains strong. Driver pay and benefits continue to make filling trucks better. A little breathing room towards the end of Produce season, but probably won't last long. As of late July, we are starting to see some carriers accepting tenders more readily, but most days are still challenging to get full award acceptance. Securing incremental capacity, whether OTR or intermodal is even more difficult, especially in the Southeast region and into Florida. We are experiencing the normal seasonal loosening in capacity, but expect the market to tighten again in early Autumn. Any disruption in freight flow such as a hurricane will quickly accelerate the market for the remainder of the calendar year. Starting to slowly find more of an equilibrium. Unsure as to how the retail peaks (and the potential importing of extra goods from China ahead of tariffs) will disrupt the market again. Normal flatbed soft summer market is still going strong. Spot rates are flattening out at high levels. Continue to experience tight market in all modes; LTL even backing up and refusing loads. Feeling some relief in capacity - rates remain elevated. Reefer rates continue to move up-- Flatbed rates continue to move up -- tanker rates continue to move up- Year over year we're up about 11 % more in specific areas. Broker trucks are definitely diminished with elog mandates. Seeing slower demand in the typical July lull, and higher number of drivers taking longer vacations in July after pay rates have increased. Flatbed market appears to have stopped tightening further; however, capacity remains constricted and pricing has yet to decline in any significant fashion. Until more drivers become available, this would appear to be the new normal as long as the economy stays relatively strong. Has eased a bit post 4th of July and quarter end. Expect next extreme pain point to be week leading up to Labor Day. Capacity has seemed to loosen up in the market. My hope is this continues throughout the rest of the 2nd half of the year. Prices are sticky downward as the market has slightly over adjusted as it was long overdue. Spot market softening, although still well above any past levels. Still overbooked by a factor daily and well in advance. Brokerage capacity still very tight, but not as tight as it was a month ago. Reefer market still very tight. Fall peak in reefer Midwest should shove us back over the top again. Capacity has loosend up after the July 4 holiday as expected. Things are loosening for dry vans coming out of the peak summer months. We're having to rely less on the spot market and, when we do go to the spot market, rates are coming back to earth a bit. We believe we're on the way down. Time to see what the new floor will be. We're going backwards on our driver seated count. Higher rates and driver pay will be needed to attract more people to the profession. Demand must be softening a little. We have had 10 days of more truck offers than loads to ship. We have not seen that for about a year. Source: Morgan Stanley Research; Note: Green = Optimistic, Orange = Neutral, Red = Bearish 25

26 Morgan Stanley Truckload Sentiment Survey (Cont'd) Exhibit 68: What is your appraisal of current TL demand? Exhibit 69: What is your expectation for TL demand in 3 Mo.? Note: Response % Pt. Spread defined as the % of respondents describing current demand as strong less the % of respondents describing current demand as weak Source: Morgan Stanley Research Note: Response % Pt. Spread defined as the % of respondents expecting forward demand to be strong less the % of respondents expecting forward demand to be weak ; Source: Morgan Stanley Research Exhibit 70: What is your appraisal of current TL supply? Exhibit 71: What is your expectation for TL supply in 3 Mo.? Note: Response % Pt. Spread defined as the % of respondents describing current supply as tight less the % of respondents describing current supply as abundant ; Source: Morgan Stanley Research Net Survey Response % Pt. Spread defined as the % of respondents expecting forward supply to be tight less the % of respondents expecting forward supply to be abundant ; Source: Morgan Stanley Research Exhibit 72: How do your current TL rates compare to your rates 1 year ago? Exhibit 73: What is your expectation for TL rates 3 months from now? Note: Response % Pt. Spread defined as the % of respondents saying current TL rates are Higher vs. a year ago less the % of respondents saying current TL rates are Lower vs. a year ago; Source: Morgan Stanley Research Note: Response % Pt. Spread defined as the % of respondents expecting TL rates to be Higher 3 Mo. from now less the % of respondents expecting TL rates to be Lower 3 Mo. from now; Source: Morgan Stanley Research 26

27 Latest Morgan Stanley Truckload Sentiment Survey Results Exhibit 74: What is your appraisal of current TL demand? Exhibit 75: What is your expectation for TL demand in 3 Mo.? Source: Morgan Stanley; Note: Survey responses from 7/24/18 and 7/31/18 Source: Morgan Stanley; Note: Survey responses from 7/24/18 and 7/31/18 Exhibit 76: What is your appraisal of current TL supply? Exhibit 77: What is your expectation for TL supply in 3 Mo.? Source: Morgan Stanley; Note: Survey responses from 7/24/18 and 7/31/18 Source: Morgan Stanley; Note: Survey responses from 7/24/18 and 7/31/18 27

28 Exhibit 78: How do your current TL rates compare to 1 yr. ago? Exhibit 79: What is your expectation for TL rates in 3 Mo.? Source: Morgan Stanley; Note: Survey responses from 7/24/18 and 7/31/18 Source: Morgan Stanley; Note: Survey responses from 7/24/18 and 7/31/18 28

29 Historical Morgan Stanley Truckload Sentiment Survey Results Exhibit 80: What is your appraisal of current TL demand? Exhibit 81: What is your expectation for TL demand in 3 Mo.? Note: Negative, Neutral and Positive correspond with % of respondents describing current demand as Weak, Neutral and Strong, respectively; Source: Morgan Stanley Research Note: Negative, Neutral and Positive correspond with % of respondents expecting forward demand to be Weak, Neutral and Strong, respectively; Source: Morgan Stanley Research Exhibit 82: What is your appraisal of current TL supply? Exhibit 83: What is your expectation for TL supply in 3 Mo.? Note: Negative, Neutral and Positive correspond with % of respondents describing current supply as Abundant, Neutral and Tight, respectively; Source: Morgan Stanley Research Note: Negative, Neutral and Positive correspond with % of respondents expecting forward supply to be Abundant, Neutral and Tight, respectively; Source: Morgan Stanley Research 29

30 Exhibit 84: What is your appraisal of current TL rates? Exhibit 85: What is your expectation for TL rates in 3 Mo.? Note: Negative, Neutral and Positive correspond with % of respondents describing current supply as Abundant, Neutral and Tight, respectively; Source: Morgan Stanley Research Note: Negative, Neutral and Positive correspond with % of respondents expecting forward supply to be Abundant, Neutral and Tight, respectively; Source: Morgan Stanley Research 30

31 Methodology Implied ACT Forecast We use ACT s monthly Seasonal Adjustment factors to gauge the relative strength or weakness of Preliminary Class 8 Net Orders for a given month. SA factors greater than 1 indicate stronger than an average month, and factors below 1 indicate a weaker than average month. We divide the current month s SA factor by the previous month s to arrive at the implied sequential % change associated with normal seasonality. We multiply the actual Class 8 Net Orders from the previous month (ACT releases actual order data by the middle of the following month) by the sequential % change implied by ACT s SA factors to arrive at ACT s Implied Forecast for the current month s Class 8 Net Orders. The table below provides an example of ACT s SA factors from 2014 and the corresponding implied seq % chg. for each month. Exhibit 86: ACT SA Factors and Implied Monthly Forecast Source: ACT, Morgan Stanley Research ATA Truck Tonnage We rely on the monthly ATA Truck Tonnage for our indicators. The ATA Truck Tonnage tracks monthly truck tonnage volumes with 2000 as the base year, dating back to 1973 (see atabusinesssolutions.com). Cass Indexes We rely on the monthly Cass Freight Indexes for our indicators. The Cass Freight Index tracks monthly freight expenditures and shipment volumes, using January 1990 as the base point (see cassinfo.com). Truckload Sentiment Survey Methodology 31

32 In an effort to quantify sentiment, over nearly two years we have sent out a bi-weekly Truckload Sentiment Survey to hundreds of shippers, carriers and other truck industry contacts with a view of on the ground trends. We publish our aggregate survey results on a bi-weekly basis alternating with our TLFI on Tuesdays. 32

33 Momentum Indicators We calculate our momentum indicator as the sequential difference (this month minus last month) in the year-over-year growth rate of the annualized data set. This indicator allows us to evaluate the acceleration of year-over-year trends in the data. We examine these trends relative to their historical mean and one standard deviation above and below the mean. We believe this measure is helpful in identifying inflection points in trend growth rates. Below is an example of our momentum indicator charts. Exhibit 87: Example: Momentum Indicator Chart Source: Morgan Stanley Research Long-Term Trends We examine the indexes over the life of the available time series. Our long-term trend charts show the variables on a monthly basis, as well as the twelve-month moving average and the year-over-year change of the monthly data set. Below is an example of our long-term trend charts. Exhibit 88: Example: Long-Term Trend Chart Source: Morgan Stanley Research Sequential Change Analysis Our sequential change analysis examines the sequential growth rate of the index 33

34 relative to historical trends. We calculate the average sequential change and standard deviation in sequential change for each month of the data set, 1985 to present. While much of the sequential change in the index is a result of seasonality, our analysis allows us to evaluate how current metrics are tracking versus historical sequential changes (effectively accounting for seasonality). The following chart is an example of our sequential change work as included. Exhibit 89: Example: Sequential Change Chart Source: Morgan Stanley Research Straight Line Revenue Forecasts We illustrate potential full-year NSA Truck Tonnage index outcomes using the historical average and standard deviation of one-month sequential changes. Our straight line index chart shows three potential outcomes: (1) The green line illustrates the full-year index outlook on an LTM basis if each month between now and the end of the year grew by one standard deviation above the average monthly sequential change; (2) the blue line illustrates the full-year index outlook on an LTM basis if each month between now and the end of the year grew by the average monthly sequential change; and (3) the red line shows the full-year index outlook on an LTM basis if each month between now and the end of the year grew by one standard deviation below the average monthly sequential change. The sequential change calculations are done using the most recent monthly data and the chart shows the YoY change on an LTM basis. Thus, the final data point, the end of this year, shows the full-year potential YoY change in the index based on each growth rate assumption. Exhibit 90: Example: Straight Line Index Forecast Chart Source: Morgan Stanley Research 34

35 35

36 Disclosure Section The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley & Co. LLC, and/or Morgan Stanley C.T.V.M. S.A., and/or Morgan Stanley Mexico, Casa de Bolsa, S.A. de C.V., and/or Morgan Stanley Canada Limited. As used in this disclosure section, "Morgan Stanley" includes Morgan Stanley & Co. LLC, Morgan Stanley C.T.V.M. S.A., Morgan Stanley Mexico, Casa de Bolsa, S.A. de C.V., Morgan Stanley Canada Limited and their affiliates as necessary. For important disclosures, stock price charts and equity rating histories regarding companies that are the subject of this report, please see the Morgan Stanley Research Disclosure Website at or contact your investment representative or Morgan Stanley Research at 1585 Broadway, (Attention: Research Management), New York, NY, USA. For valuation methodology and risks associated with any recommendation, rating or price target referenced in this research report, please contact the Client Support Team as follows: US/Canada ; Hong Kong ; Latin America (U.S.); London +44 (0) ; Singapore ; Sydney +61 (0) ; Tokyo +81 (0) Alternatively you may contact your investment representative or Morgan Stanley Research at 1585 Broadway, (Attention: Research Management), New York, NY USA. Analyst Certification The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this report: Ravi Shanker. Unless otherwise stated, the individuals listed on the cover page of this report are research analysts. Global Research Conflict Management Policy Morgan Stanley Research has been published in accordance with our conflict management policy, which is available at Important US Regulatory Disclosures on Subject Companies As of June 29, 2018, Morgan Stanley beneficially owned 1% or more of a class of common equity securities of the following companies covered in Morgan Stanley Research: Schneider National Inc., Union Pacific Corp., XPO Logistics, Inc.. Within the last 12 months, Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of C.H. Robinson Worldwide Inc., Canadian Pacific Railway Ltd., CSX Corporation, FedEx Corporation, Kansas City Southern, Union Pacific Corp., United Parcel Service, US Xpress Enterprises Inc. Within the last 12 months, Morgan Stanley has received compensation for investment banking services from C.H. Robinson Worldwide Inc., Canadian Pacific Railway Ltd., CSX Corporation, FedEx Corporation, Genesee & Wyoming Inc., Kansas City Southern, Norfolk Southern Corp., Old Dominion Freight Line Inc, Union Pacific Corp., United Parcel Service, US Xpress Enterprises Inc. In the next 3 months, Morgan Stanley expects to receive or intends to seek compensation for investment banking services from ArcBest Corp, C.H. Robinson Worldwide Inc., Canadian National Railway Co., Canadian Pacific Railway Ltd., CSX Corporation, Echo Global Logistics Inc, FedEx Corporation, Genesee & Wyoming Inc., Heartland Express Inc., Hub Group Inc, J.B. Hunt Transport Services Inc., Kansas City Southern, Landstar System Inc, Norfolk Southern Corp., Old Dominion Freight Line Inc, Saia, Inc., Schneider National Inc., Union Pacific Corp., United Parcel Service, US Xpress Enterprises Inc, Werner Enterprises, XPO Logistics, Inc.. Within the last 12 months, Morgan Stanley has received compensation for products and services other than investment banking services from Canadian Pacific Railway Ltd., CSX Corporation, Genesee & Wyoming Inc., J.B. Hunt Transport Services Inc., Kansas City Southern, Norfolk Southern Corp., Old Dominion Freight Line Inc, Union Pacific Corp., United Parcel Service, XPO Logistics, Inc.. Within the last 12 months, Morgan Stanley has provided or is providing investment banking services to, or has an investment banking client relationship with, the following company: ArcBest Corp, C.H. Robinson Worldwide Inc., Canadian National Railway Co., Canadian Pacific Railway Ltd., CSX Corporation, Echo Global Logistics Inc, FedEx Corporation, Genesee & Wyoming Inc., Heartland Express Inc., Hub Group Inc, J.B. Hunt Transport Services Inc., Kansas City Southern, Landstar System Inc, Norfolk Southern Corp., Old Dominion Freight Line Inc, Saia, Inc., Schneider National Inc., Union Pacific Corp., United Parcel Service, US Xpress Enterprises Inc, Werner Enterprises, XPO Logistics, Inc.. Within the last 12 months, Morgan Stanley has either provided or is providing non-investment banking, securities-related services to and/or in the past has entered into an agreement to provide services or has a client relationship with the following company: C.H. Robinson Worldwide Inc., Canadian National Railway Co., Canadian Pacific Railway Ltd., CSX Corporation, Echo Global Logistics Inc, FedEx Corporation, Genesee & Wyoming Inc., J.B. Hunt Transport Services Inc., Kansas City Southern, Norfolk Southern Corp., Old Dominion Freight Line Inc, Union Pacific Corp., United Parcel Service, XPO Logistics, Inc.. Morgan Stanley & Co. LLC makes a market in the securities of ArcBest Corp, C.H. Robinson Worldwide Inc., Canadian National Railway Co., Canadian Pacific Railway Ltd., CSX Corporation, Echo Global Logistics Inc, Expeditors International of Washington I, FedEx Corporation, Genesee & Wyoming Inc., Heartland Express Inc., Hub Group Inc, J.B. Hunt Transport Services Inc., Kansas City Southern, Knight-Swift Transportation Holdings Inc, Landstar System Inc, Norfolk Southern Corp., Old Dominion Freight Line Inc, Saia, Inc., Union Pacific Corp., United Parcel Service, Werner Enterprises, XPO Logistics, Inc.. The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues. Equity Research analysts' or strategists' compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks. Morgan Stanley and its affiliates do business that relates to companies/instruments covered in Morgan Stanley Research, including market making, providing liquidity, fund management, commercial banking, extension of credit, investment services and investment banking. Morgan Stanley sells to and buys from customers the securities/instruments of companies covered in Morgan Stanley Research on a principal basis. Morgan Stanley may have a position in the debt of the Company or instruments discussed in this report. Morgan Stanley trades or may trade as principal in the debt securities (or in related derivatives) that are the subject of the debt research report. Certain disclosures listed above are also for compliance with applicable regulations in non-us jurisdictions. STOCK RATINGS Morgan Stanley uses a relative rating system using terms such as Overweight, Equal-weight, Not-Rated or Underweight (see definitions below). Morgan Stanley does not assign ratings of Buy, Hold or Sell to the stocks we cover. Overweight, Equal-weight, Not-Rated and Underweight are not the equivalent of buy, hold and sell. Investors should carefully read the definitions of all ratings used in Morgan Stanley Research. In addition, since Morgan Stanley Research contains more complete information concerning the analyst's views, investors should carefully read Morgan Stanley Research, in its entirety, and not infer the contents from the rating alone. In any case, ratings (or research) should not be used or relied upon as investment advice. An investor's decision to buy or sell a stock should depend on individual circumstances (such as the investor's existing holdings) and other considerations. Global Stock Ratings Distribution (as of July 31, 2018) The Stock Ratings described below apply to Morgan Stanley's Fundamental Equity Research and do not apply to Debt Research produced by the Firm. 36

37 For disclosure purposes only (in accordance with NASD and NYSE requirements), we include the category headings of Buy, Hold, and Sell alongside our ratings of Overweight, Equal-weight, Not-Rated and Underweight. Morgan Stanley does not assign ratings of Buy, Hold or Sell to the stocks we cover. Overweight, Equal-weight, Not-Rated and Underweight are not the equivalent of buy, hold, and sell but represent recommended relative weightings (see definitions below). To satisfy regulatory requirements, we correspond Overweight, our most positive stock rating, with a buy recommendation; we correspond Equal-weight and Not-Rated to hold and Underweight to sell recommendations, respectively. STOCK RATING CATEGORY COVERAGE UNIVERSE INVESTMENT BANKING CLIENTS (IBC) OTHER MATERIAL INVESTMENT SERVICES CLIENTS (MISC) COUNT % OF TOTAL COUNT % OF TOTAL IBC % OF RATING CATEGORY COUNT % OF TOTAL OTHER MISC Overweight/Buy % % 26% % Equal-weight/Hold % % 27% % Not-Rated/Hold 49 2% 4 1% 8% 7 0% Underweight/Sell % 75 10% 14% % TOTAL 3, Data include common stock and ADRs currently assigned ratings. Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months. Due to rounding off of decimals, the percentages provided in the "% of total" column may not add up to exactly 100 percent. Analyst Stock Ratings Overweight (O). The stock's total return is expected to exceed the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next months. Equal-weight (E). The stock's total return is expected to be in line with the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next months. Not-Rated (NR). Currently the analyst does not have adequate conviction about the stock's total return relative to the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next months. Underweight (U). The stock's total return is expected to be below the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next months. Unless otherwise specified, the time frame for price targets included in Morgan Stanley Research is 12 to 18 months. Analyst Industry Views Attractive (A): The analyst expects the performance of his or her industry coverage universe over the next months to be attractive vs. the relevant broad market benchmark, as indicated below. In-Line (I): The analyst expects the performance of his or her industry coverage universe over the next months to be in line with the relevant broad market benchmark, as indicated below. Cautious (C): The analyst views the performance of his or her industry coverage universe over the next months with caution vs. the relevant broad market benchmark, as indicated below. Benchmarks for each region are as follows: North America - S&P 500; Latin America - relevant MSCI country index or MSCI Latin America Index; Europe - MSCI Europe; Japan - TOPIX; Asia - relevant MSCI country index or MSCI sub-regional index or MSCI AC Asia Pacific ex Japan Index. Important Disclosures for Morgan Stanley Smith Barney LLC Customers Important disclosures regarding the relationship between the companies that are the subject of Morgan Stanley Research and Morgan Stanley Smith Barney LLC or Morgan Stanley or any of their affiliates, are available on the Morgan Stanley Wealth Management disclosure website at For Morgan Stanley specific disclosures, you may refer to Each Morgan Stanley Equity Research report is reviewed and approved on behalf of Morgan Stanley Smith Barney LLC. This review and approval is conducted by the same person who reviews the Equity Research report on behalf of Morgan Stanley. This could create a conflict of interest. Other Important Disclosures Morgan Stanley & Co. International PLC and its affiliates have a significant financial interest in the debt securities of C.H. Robinson Worldwide Inc., Canadian National Railway Co., CSX Corporation, Echo Global Logistics Inc, FedEx Corporation, Genesee & Wyoming Inc., Kansas City Southern, Norfolk Southern Corp., Union Pacific Corp., United Parcel Service, US Xpress Enterprises Inc, XPO Logistics, Inc.. Morgan Stanley Research policy is to update research reports as and when the Research Analyst and Research Management deem appropriate, based on developments with the issuer, the sector, or the market that may have a material impact on the research views or opinions stated therein. In addition, certain Research publications are intended to be updated on a regular periodic basis (weekly/monthly/quarterly/annual) and will ordinarily be updated with that frequency, unless the Research Analyst and Research Management determine that a different publication schedule is appropriate based on current conditions. Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be, and do not constitute, advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Morgan Stanley produces an equity research product called a "Tactical Idea." Views contained in a "Tactical Idea" on a particular stock may be contrary to the recommendations or views expressed in research on the same stock. This may be the result of differing time horizons, methodologies, market events, or other factors. For all research available on a particular stock, please contact your sales representative or go to Matrix at Morgan Stanley Research is provided to our clients through our proprietary research portal on Matrix and also distributed electronically by Morgan Stanley to clients. Certain, but not all, Morgan Stanley Research products are also made available to clients through third-party vendors or redistributed to clients through alternate electronic means as a convenience. For access to all available Morgan Stanley Research, please contact your sales representative or go to Matrix at Any access and/or use of Morgan Stanley Research is subject to Morgan Stanley's Terms of Use ( By accessing and/or using Morgan Stanley Research, you are indicating that you have read and agree to be bound by our Terms of Use 37