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This weekly report presents the most recent views we are hearing from industry insiders and summarizes the research of Wolfe Trahan. Included are (1) key takeaways, selected shipper comments; (2) notices of upcoming industry events; (3) key takeaways from some of our notes from the past week; (4) recent stock performance for our transport universe; (5) updated comparison tables for the airfreight & logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.
Chris Senyek hosted this 1-hour conference call. Key topics included: Tax policy outlook, Special situations (spin-offs, NOLs, post-bankruptcy, etc.), New stock ideas based on proprietary screens, Financials – thoughts after earnings, Recent dividend research, and Pension underfunding.
AAWW’s stock jumped 11% yesterday after materially beating previously lowered 1Q Cons. expectations, while maintaining annual EPS guidance. Relative to our low-end expectations, AAWW reported much stronger AMC (military) and Commercial Charter rev., modestly less core ACMI rev., and much better pre-tax margins. However, airfreight capacity continues to outpace demand, and it seems like as challenging time to place favorably priced long-term ACMI contracts. Thus, although we raised estimates materially and our target price from $38 to $45, we continue to see downside risk to Consensus and management’s guidance – AAWW remains rated Underperform.
YRCW’s report was better than we expected and its liquidity only dropped $36M in the quarter into lower than expected CapEx, a modest working capital benefit (vs. our expectations for a seasonally large working capital drag), lower non-union pension payments, and better underlying operating performance at YRC Regional. Based on its $36M drop in liquidity in 1Q and its current liquidity of $241M, this implies another 6-7 quarters before YRCW would run out of cash. Given our expectation for liquidity issues in C13, potential covenant risk and long-term risk of dilution, we reiterate our Underperform rating and $0 equity target price.
Total Week 17 rail vols increased 2.5% y/y vs. +2.4% and -1.1% the prior 2 weeks. Excluding coal, rail vols grew 7.2% y/y, in line with +7.2% last week. The rails faced an easy comp as Easter Sunday occurred in Week 17 last year. Comps will normalize next week.
We publish the “Friday Flyer” each week with highlights from the U.S. airline industry, and our opinion on how the events should impact airline stocks. Included are (1) a summary from the week with our sentiment gauge; (2) updates on noteworthy news events that might be interesting but maybe unworthy of a standalone note (3) key changes to airline schedules per OAG data; (4) recent stock performance and an update on the correlation of WTI and Heating Oil with airline stocks; (5) updated guidance/data points (6) our stat of the week (7) updated comp tables, and more.
GM reported 1Q:12 EPS of $0.93 vs our $0.91 est and Cons $0.85, with consolidated EBIT margin growth of 20bp y/y at $2.18B vs our flat y/y est of $2.06B. $1.7B of GMNA EBIT was below our $2.0B est, but upside came vs low expectations from GME & GMSA, with GMIO about in line. GAAP EPS of $0.60 included a $0.6B ($0.33/shr) European impairment.
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