Transportation Shipper Call: West Coast Port Update, and Thoughts Ahead of TL Bid Season

Transcription

1 Airfreight & Logistics Market Overweight Railroads Market Weight Trucking Market Weight Truck OEMs & Suppliers Market Weight February 27, 2015 Transportation Shipper Call: West Coast Port Update, and Thoughts Ahead of TL Bid Season Conference Call: Friday, February 27 th (Int l: ) Passcode: Senior Transportation Analyst This report is limited solely for the use of clients of Wolfe Research. Please refer to the DISCLOSURE SECTION located at the end of this report for Analyst Certifications and Other Disclosures. For Important Disclosures, please go to or write to us at Wolfe Research, LLC, 420 Lexington Avenue, Suite 648, New York, NY

2 Upcoming Events February 27: Wolfe Research will host a Quarterly Wolfpack lunch in New York City March 18: Wolfe Research will host a headquarter visit to JBHT in Lowell, AR March 26-27: Wolfe Research will host meetings at the Mid-America Trucking Show in Louisville, KY May 19-20, 2015: Wolfe Research s 8 th Annual Global Transportation Conference in New York City 2

3 Speakers on Today s Call Schneider National, Inc. Mark Rourke, President Truckload Services Revenue: $3.6 Billion Core Regions: Midwest, Southeast and Northeast Modes: Dry Van TL, Dedicated, Regional, Expedited, Bulk, Intermodal, Brokerage and Logistics CRST International Dave Rusch, CEO Revenue: $1.3 Billion Core Regions: Midwest, Northeast and California Modes: Expedited, Flatbed, Dedicated, Refrigerated TL, Intermodal, Brokerage and Logistics Covenant Transportation Group David Parker, Chairman & CEO Revenue: $719 Million Core Regions: West Coast, Southeast, Midwest and Northeast Modes: Expedited, Refrigerated Truckload, Dedicated, Brokerage Coyote Logistics Jonathan Sisler Revenue: ~ $2 Billion run-rate Modes: Truckload Brokerage, LTL Brokerage, Intermodal, TMS 3

4 Transport Stock Performance YTD YTD Since YTD Since Port Deal Port Deal CVTI 48.5% 230.2% 17.1% 7.0% NSC 50.1% 18.1% 0.3% (1.6%) CGI 7.8% 16.5% 16.7% 4.0% Transports 38.3% 19.6% 0.0% 0.5% GWR 26.2% (6.4%) 13.4% 8.3% SWFT 143.5% 28.9% (0.8%) 1.6% WBC 43.3% 12.2% 12.3% (0.1%) CHRW (7.7%) 28.3% (0.9%) 2.4% WAB 69.7% 17.0% 9.9% 0.5% CMI 30.1% 2.3% (1.3%) (0.2%) EXPD 11.9% 0.8% 9.4% 7.2% KNX 25.4% 83.5% (1.5%) 0.1% RRTS 48.6% (13.4%) 8.9% 2.1% CP 48.9% 27.3% (2.1%) (0.6%) UTIW 31.0% (31.3%) 7.1% 3.6% LSTR 9.5% 26.2% (2.9%) 0.0% FWRD 25.4% 14.7% 6.9% 0.2% KSU 48.3% (1.5%) (4.1%) 0.4% HUBG 18.7% (4.5%) 5.3% 3.4% PCAR 30.9% 14.9% (4.9%) 0.1% WERN 14.1% 26.0% 2.9% 1.1% CSX 45.8% 25.9% (5.3%) (3.5%) Russell % 3.5% 2.9% 0.6% HTLD 50.1% 37.7% (5.6%) 0.0% S&P % 11.4% 2.5% 0.0% AAWW (7.2%) 19.8% (7.7%) (3.6%) JBHT 29.5% 9.0% 2.1% 1.0% UPS 42.5% 5.8% (8.4%) (0.1%) R 47.8% 25.8% 1.7% (0.4%) CNW 42.7% 23.8% (8.6%) 2.3% UNP 33.6% 41.8% 1.4% (2.3%) ARCB 252.7% 37.7% (9.8%) 1.1% OEM Avg 37.9% 5.6% 1.2% 0.1% UACL 67.2% (6.6%) (10.2%) 2.9% ODFL 54.7% 46.4% 0.9% 0.8% NAV 75.4% (12.3%) (10.5%) 2.3% FDX 56.7% 20.8% 0.5% (2.2%) YRCW 157.3% 29.5% (11.0%) 0.3% CNI 25.3% 20.9% 0.3% (1.1%) SAIA 107.9% 72.7% (15.4%) 1.5% YTD Since Sector Port Deal TL 37.2% 51.2% 4.2% 2.3% Non-Asset Forwarders (0.2%) 16.5% 2.9% 4.2% S&P % 11.4% 2.5% 0.0% Asset-Light Forwarders 27.3% 5.3% 1.7% 1.3% OEM 37.9% 5.6% 1.2% 0.1% Total Transports 38.3% 19.6% 0.0% 2.1% Large-Cap Rails 42.0% 27.2% (0.7%) (1.5%) Express 50.4% 14.5% (2.9%) (1.4%) LTL (ex-yrcw) 82.0% 44.2% (7.3%) 1.3% Note: Stock Performance as of 2/26/2015. Stock Performance Since Port Deal is from 2/20/2015 to 2/26/2015. Source: Company reports, FactSet Research Systems; Wolfe Research estimates. 4

5 Boats Waiting in the Water a Week Ago Source: Google Maps, MarineTraffic. 5

6 Boats Waiting in the Water Today Source: Google Maps, MarineTraffic. 6

7 Jul-01 Aug-01 Sep-01 Oct-01 Nov-01 Dec-01 Jan-02 Feb-02 Mar-02 Apr-02 May-02 Jun-02 Jul-02 Aug-02 Sep-02 Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 Jan-02 Feb-02 Mar-02 Apr-02 May-02 Jun-02 Jul-02 Aug-02 Sep-02 Oct-02 Nov-02 Dec-02 Jan-03 Feb-03 Mar-03 Apr-03 May-03 Jun-03 1Q:01 2Q:01 3Q:01 4Q:01 1Q:02 2Q:02 3Q:02 4Q:02 1Q:03 2Q:03 3Q:03 4Q:03 Y/Y Change - 6 Week Average Y/Y Change A Look Back at the 2002 Port Lockout Rail Intermodal Volumes ( ) 30% 25% 20% 15% 10% 5% 0% (5%) (10%) 10-Day West Coast Port Lock-Out Western Rails Eastern Rails Canadian Rails JBHT Quarterly Intermodal Loads (Y/Y) 20% 15% 10% 5% 0% (5%) (10%) (2.5%) 5.6% 2.7% (3.3%) 5.6% 6.9% 6.7% 5.2% 15.2% 12.7% 9.1% 8.0% West Coast Port Lock-Out EXPD Net Revenue Growth (Y/Y) ATA Truck Tonnage (Y/Y) 50.0% 40.0% 30.0% 20.0% EXPD Air Net Revenue Growth Y/Y EXPD Ocean Net Revenue Growth Y/Y 9% 8% 7% 6% 5% West Coast Port Lock-Out 10.0% 4% 0.0% (10.0%) 1Q:01 2Q:01 3Q:01 4Q:01 1Q:02 2Q:02 3Q:02 4Q:02 1Q:03 2Q:03 3Q:03 4Q:03 3% 2% 1% (20.0%) 0% (30.0%) Note: West Coast Lockout dates were between 9/27/2002 through 10/9/2002. Source: AAR; company reports; Wolfe Research. 7

8 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Freight Volumes Are Growing Strongly Wolfe Research Seasonal Freight Index Showing Best Trend in Past 4 Years Reading of 50 indicates normal seasonalilty Note: Data through January includes Cass Freight Index, ATA Advanced Truck Tonnage Index, Rail volumes, WC Port Volumes, and IANA Container Volumes. This methodology indexes monthly sequential volume changes vs. historical sequential changes in the same months during prior years to isolate the real underlying freight trends from m/m seasonal changes and y/y comps excluding freight data from July 2008 through June Our Index includes data points for truck, rail, domestic air, int l air and int l ocean. Anything above 50 indicates above-average seasonal trends while anything below 50 indicates belowaverage seasonal trends. Our index takes a three-month rolling average of sequential volume changes compared to the corresponding 3-month rolling five-year average. We compare 2006 and 2007 to and 02-06, respectively while the index for compares those years to in order to remove the seasonally atypical volatility of the last few years. Also note that prior to 08 the index does not include Int l Air data as we do not have a full five-year history to compare to for 06 and 07. Source: Cass Information Systems, Inc.; American Trucking Associations; Association of American Railroads; Airlines for America; International Air Transport Association; Port of Los Angeles, Port of Long Beach; Port of Oakland; Wolfe Research. 8

9 4Q:12 1Q:13 2Q:13 3Q:13 4Q:13 1Q:14 2Q:14 3Q:14 4Q:14 4Q:12 1Q:13 2Q:13 3Q:13 4Q:13 1Q:14 2Q:14 3Q:14 4Q:14 1Q:13 2Q:13 3Q:13 4Q:13 1Q:14 2Q:14 3Q:14 4Q:14 4Q:12 1Q:13 2Q:13 3Q:13 4Q:13 1Q:14 2Q:14 3Q:14 4Q:14 4Q:12 1Q:13 2Q:13 3Q:13 4Q:13 1Q:14 2Q:14 3Q:14 4Q:14 Quarterly Transportation Pricing Changes (Y/Y) RAILROADS CNI, CP, CSX, NSC, UNP Est. Pricing Net of Fuel, Currency, and Mix INTERMODAL JBHT, HUBG Revenue / Load (Ex-Fuel Surcharge) EXPRESS FDX, UPS US Domestic Package Yield 4% 3% 2% 1% 0% 1.6% 2.1% 2.6% 1.9% 1.9% 1.7% 1.8% 2.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% 1.0% 2.0% 1.6% 0.7% 1.1% 1.0% 0.8% 0.2% 2.8% 2% 1% 0% (1%) (2%) 1.5% 0.8% 0.4% 0.5% 0.4% (0.3%) (0.6%) (1.1%) (1.2%) TRUCKLOAD (TL) CGI, CVTI, CNW Truck, JBHT Truck, KNX, SWFT, WERN Revenue / Loaded Mile (Ex-Fuel) LESS-THAN-TRUCKLOAD (LTL) ARCB, CNW, FDX Freight, ODFL, SAIA Revenue / CWT (Ex-Fuel) 10% 8% 6% 4% 2% 0% 4.9% 3.9% 3.6% 3.9% 2.3% 1.8% 1.2% 1.7% 7.6% 6% 5% 4% 3% 2% 1% 0% 5.2% 2.9% 1.6% 1.8% 1.5% 1.7% 1.9% 0.9% 0.7% Source: Company reports; Wolfe Research estimates. 9

10 1Q:12 2Q:12 3Q:12 4Q:12 1Q:13 2Q:13 3Q:13 4Q:13 1Q:14 2Q:14 3Q:14 4Q:14 1Q:12 2Q:12 3Q:12 4Q:12 1Q:13 2Q:13 3Q:13 4Q:13 1Q:14 2Q:14 3Q:14 4Q:14 Truck Volumes and Yields LTL Tonnage and Yields TL Utilization and Yields 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% (1.0%) 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% Rev/cwt, net of fuel surcharge, y/y Tonnage/day, y/y Rev/Loaded Mile, Net of Fuel, y/y Loaded Miles/Average Tractor y/y Note: LTL tonnage/day is volume-weighted; Based on ARCB, CNW, ODFL, SAIA, FDX, and UPS. TL data represents average of CVTI, CGI, CNW TL, JBHT TL, KNX, SWFT and WERN. Source: Company reports; Wolfe Research estimates. 10

11 Spot Rates Are Starting to Flatten Out 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% (5.0%) (10.0%) (15.0%) Dry Van Y/Y Dry Van 2-Yr Stacked 140.0% 120.0% 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% (20.0%) (40.0%) (60.0%) Market Demand Index Y/Y Market Demand Index 2-Yr Stacked Source: Internet TruckStop; Bloomberg; Wolfe Research. 11

12 TL Fleet Growth is Starting to Happen E CGI 2.6% 2.2% 10.9% 1.9% 2.5% -2.8% -2.7% -0.4% -5.0% -0.5% 4.0% CVTI -0.1% 7.1% -4.4% -7.4% -5.4% -0.8% -3.5% -3.2% -6.8% -0.9% 2.6% JBHT 0.8% 0.3% -8.2% -16.6% -10.6% 0.1% 3.8% -2.1% 12.5% 6.1% 6.6% KNX 16.1% 11.9% 2.6% -1.6% 1.0% 3.5% 2.8% 5.1% -5.9% 5.2% 5.4% SWFT -3.3% 0.0% 7.3% -9.8% -7.6% 0.4% 2.8% -4.4% 0.4% 3.6% 6.1% WERN 1.7% 2.9% -8.3% -6.7% -5.8% 0.3% -1.0% -0.7% -1.4% 0.0% 1.0% Average 3.0% 4.4% -2.2% -8.4% -5.7% 0.7% 1.0% -1.1% -0.2% 2.8% 4.4% Note: Year-over-year fleet growth excludes acquisitions for CGI, KNX and SWFT beginning in JBHT figures represent TL and Dedicated combined. Source: Company data; Wolfe Research estimates. 12

13 TL Carrier Metrics Yields (Revenue/Loaded Mile, Net) Volumes (Total Loaded Miles) Year-over-Year Year-over-Year 3Q:13 4Q:13 1Q:14 2Q:14 3Q:14 4Q:14 3Q:13 4Q:13 1Q:14 2Q:14 3Q:14 4Q:14 CGI 2.2% 3.9% 2.5% 2.0% 2.3% 10.2% CGI 8.6% 24.6% 21.9% 15.5% 7.6% 5.3% CVTI 0.5% 2.6% 3.3% 3.7% 6.3% 11.6% CVTI -3.5% -6.0% -8.3% -5.1% -0.8% 4.7% CNW TL (1) 0.5% 0.9% 0.4% 1.4% 2.5% 2.3% CNW TL (1) 1.1% 1.2% -1.2% -1.5% -4.0% -3.4% HTLD (2) NA NA NA NA NA NA HTLD (2) NA NA NA NA NA NA KNX 1.4% 2.3% 4.9% 5.6% 6.5% 12.2% KNX -4.0% -3.1% -2.0% 0.9% 1.7% 16.4% SWFT 2.4% 2.6% 3.0% 3.7% 5.1% 6.4% SWFT 0.5% -1.8% -2.8% -5.5% -5.0% -5.0% WERN 2.2% 2.3% 1.9% 1.2% 1.7% 4.6% WERN -3.5% -1.5% -2.4% 2.5% 2.3% 2.0% AVERAGE 1.6% 2.4% 2.7% 2.9% 4.1% 7.9% AVERAGE -0.1% 2.2% 0.9% 1.2% 0.3% 3.3% Operating Ratio (OR) Utilization (Loaded Miles/Truck) 3Q:13 4Q:13 1Q:14 2Q:14 3Q:14 4Q:14 3Q:13 4Q:13 1Q:14 2Q:14 3Q:14 4Q:14 CGI 93.4% 95.4% 96.5% 93.1% 93.0% 93.0% CGI -1.7% -1.7% -7.0% 0.3% -0.1% -0.6% CVTI 96.6% 95.0% 99.8% 94.8% 92.6% 88.1% CVTI -1.9% -0.3% -1.6% 3.0% 6.3% 7.9% CNW TL (1) 93.8% 93.6% 95.5% 90.6% 92.6% 92.3% CNW TL (1) -1.7% -1.6% -4.1% -3.1% -4.9% -4.4% HTLD (2) 80.1% 84.9% 90.8% 82.1% 83.3% 83.1% HTLD (2) NA NA NA NA NA NA KNX 89.9% 87.1% 87.5% 85.3% 85.3% 83.4% KNX -0.4% 0.7% 0.3% 0.4% 0.9% -0.1% SWFT 91.7% 90.5% 95.4% 91.3% 90.7% 88.4% SWFT -1.2% -0.4% -1.5% 1.8% 2.2% 2.5% WERN 93.6% 93.2% 95.2% 92.5% 92.4% 90.5% WERN -3.3% -1.5% -0.3% 3.7% 5.6% 3.9% AVERAGE 91.3% 91.4% 94.4% 89.9% 90.0% 88.4% AVERAGE -1.7% -0.8% -2.4% 1.0% 1.7% 1.5% Revenue Growth Year-over-Year EBIT Growth Year-over-Year 3Q:13 4Q:13 1Q:14 2Q:14 3Q:14 4Q:14 3Q:13 4Q:13 1Q:14 2Q:14 3Q:14 4Q:14 CGI 14.2% 30.7% 29.1% 21.4% 10.5% 14.9% CGI -24% -37% -16% 5% 17% 74% CVTI 1.4% -0.6% -2.3% 0.7% 3.9% 17.2% CVTI 27% 72% NM 43% 122% 178% CNW TL (1) 1.3% 0.4% -0.6% 1.4% -1.8% -2.3% CNW TL (1) -20% 5% -36% 24% 19% 20% HTLD (2) -3.2% 34.6% 67.2% 69.3% 66.2% 0.0% HTLD (2) 32% 12% -32% 38% 40% 23% KNX 0.6% 3.1% 5.8% 7.9% 13.5% 27.1% KNX -13% 13% 22% 22% 64% 64% SWFT 4.0% 2.7% 2.7% 4.6% 4.1% 6.0% SWFT 9% -13% -34% -6% 18% 29% WERN 1.0% 1.6% -0.2% 7.0% 10.4% 6.8% WERN -22% -18% -18% -1% 28% 49% AVERAGE 2.8% 10.4% 14.5% 16.0% 15.2% 9.9% AVERAGE -1.5% 4.9% -18.8% 17.8% 44.0% 62.4% Note: Operating Ratio, OR Improvement, EBIT Growth represent WR estimates for continuing EBIT. (1) Operating metrics for CNW are for Truckload segment only. (2) HTLD does not provide volume, pricing or utilization metrics. Source: Company reports; Wolfe Research estimates. 13

14 Disclosures Analyst Certification: The analyst of Wolfe Research, LLC primarily responsible for this research report whose name appears first on the front page of this research report hereby certifies that (i) the recommendations and opinions expressed in this research report accurately reflect the research analysts personal views about the subject securities or issuers and (ii) no part of the research analysts compensation was, is or will be directly or indirectly related to the specific recommendations or views contained in this report. Other Disclosures: Wolfe Research, LLC Fundamental Stock Ratings Key: Outperform (OP): The security is projected to outperform analyst's industry coverage universe over the next 12 months. Peer Perform (PP): The security is projected to perform approximately in line with analyst's industry coverage universe over the next 12 months. Underperform (UP): The security is projected to underperform analyst's industry coverage universe over the next 12 months. Wolfe Research, LLC uses a relative rating system using terms such as Outperform, Peer Perform and Underperform (see definitions above). Please carefully read the definitions of all ratings used in Wolfe Research, LLC research. In addition, since Wolfe Research, LLC research contains more complete information concerning the analyst s views, please carefully read Wolfe Research, LLC research in its entirety and not infer the contents from the ratings alone. In all cases, ratings (or research) should not be used or relied upon as investment advice and any investment decisions should be based upon individual circumstances and other considerations. Wolfe Research, LLC Sector Weighting System: Market Overweight (MO): Expect the industry to outperform the primary market index for the region (S&P 500 in the U.S.) by at least 10% over the next 12 months. Market Weight (MW): Expect the industry to perform approximately in line with the primary market index for the region (S&P 500 in the U.S.) over the next 12 months. Market Underweight (MU): Expect the industry to underperform the primary market index for the region (S&P 500 in the U.S.) by at least 10% over the next 12 months. Wolfe Research, LLC Distribution of Fundamental Stock Ratings (As of December 31, 2014): Outperform: 41% 2% Investment Banking Clients Peer Perform: 50% 1% Investment Banking Clients Underperform: 9% 0% Investment Banking Clients 14

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