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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.
We found three different bills in various stages of the legislative process that, if passed, could negatively impact airlines. One forces airlines to allow customers to check one bag for free while also prohibiting fees for carry-on items (Basic Airline Services to Improve Customer Satisfaction Act), another prohibits airlines from establishing a separate line through security for premium travelers (Air Passenger Fairness Act), and another relating to tarmac delays (Airline Passenger Bill of Rights Act). As we note in our stat of the week only 1% of bills introduced last year become law so the chances that any of these bills see the light of day is remote, but we see real threats to still-transforming airline business models if Democrats win back the House and keep the Senate and the White House this November. Further, we believe this issue is either overlooked or cursorily ignored by many investors.
Total Week 23 rail vols increased 2.9% y/y, improved from -1.5% and +0.2% the prior 2 weeks. Vols ex-coal improved 5.3%, up from +1.8% and +2.3% the past 2 weeks. Overall rail vols are now tracking up 0.6% QTD (vs. +1.0% in 1Q) compared with our forecast of about +1% for the full qtr.
ABFS announced it will acquire Panther Expedited Services from private equity firm Fenway Partners for $180M. Panther is an asset-light expedited TL carrier with growing int’l air/ocean freight forwarding and logistics services. Panther generated $215M of rev. and $24M of adjusted EBITDA in C11, implying a 7.7x trailing EBITDA purchase multiple. ABFS also announced small profitability in May and a GRI. We see lots of operating leverage for ABFS into improving sequential vols and solid LTL pricing trends, potential for more favorable labor costs next year, and yesterday’s accretive acquisition adds more potential upside to estimates. Our reduced $18 target price (from $22) implies significant upside from current depressed levels well below book value.
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