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GM reported clean 2Q:12 EPS of $0.90 vs our $0.75 est and Cons $0.74, with no special items. GM is still benefiting from a low tax rate at 13% in 2Q (our $4.35 C13E is taxed at 30%), but this hurt by $0.01/shr vs our 12% est, though interest income was $0.02/shr higher than our est. EBIT beat our est by $0.14/shr.
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.
UAL is ending its JV with Aer Lingus. In Mar In Mar-10 UAL launched an “enhanced codeshare with Irish airline Aer Lingus, which was basically a UAL branded daily flight operated on an Aer Lingus aircraft between Dulles (IAD) and Madrid (MAD). UAL pilots, already sensitive about the “outsourcing” of their jobs to lower paid regional pilots, came to loathe the JV because it involved lucrative long haul international flying. Though the IAD-MAD flight only represented 1.6% of UAL’s transatlantic capacity on an LTM basis by seat count, the JV turned into an extremely high profile and sensitive topic with pilots, who despised it, and the entire thing probably evolved into more trouble than it was worth to UAL management.
AAWW beat 2Q Cons. expectations by 28% but kept its full-year C12 guidance unchanged. We are raising our C12-13 EPS estimates by 10% and 7% to $4.80 and $4.80 (14% EBIT growth next year but flat EPS due to higher interest expense) but we remain materially below prior Cons. of $5.19 and $6.25. We continue to see plane placement risk for AAWW the next 12-18 months, as well as risk to C12 EPS guidance which remains back-end loaded.
ODFL beat our expectations and Cons. by 8% and its stock jumped 13% yesterday after underperforming leading up to its report. ODFL continues to materially outperform its LTL competitors, but has much higher expectations and less potential margin improvement going forward in our view. We also think it could be tough to sustain both strong market share gains and meaningful OR improvement in a slowing economy as other carriers likely begin to focus a bit more on tonnage growth.
Excluding gains on sales and insurance recoveries among other one-time items, GWR reported 2Q EPS $0.68, in line with Cons. and modestly below our expectation. C12 is a year of transition for GWR, but we anticipate robust EPS growth next year from the RA acquisition, large new iron ore contracts in Australia and Canada, and improving coal vols off the bottom. We reiterate our OP rating and are raising our target price to $71.
Total Week 30 rail vols increased 1.9% y/y, decelerated from +2.1% and +3.6% the past 2 weeks. Still, total vols are tracking up 3.0% the past 6 weeks, better than +1% in both 2Q and 1Q, aided by easy comps the prior few weeks against heavy flooding in the Midwest a year ago.
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