Ed Wolfe & Scott Group
JBHT is one of our top transport performers this year however, we expect slower intermodal vol. growth in 4Q and see potential for a modest EPS miss this qtr. so the stock feels a bit ahead of itself in the near term. While we are cautious on near-term EPS and stock performance, JBHT still stands out among the transports as a clear secular story on track to generate 14% underlying volume growth in C12 or about 7x U.S. GDP. We believe JBHT should see another year of double-digit intermodal vol. growth in C13 and its remains the best way to play secular intermodal share growth the next several years. We would not expect a potential near-term pullback to be long lived and we continue to rate JBHT Outperform.
Inside Freight: FDX Moves Toward Headcount Reductions; RRTS, CGI and WAB Acquisitions; UPS/TNTE Update; Export Coal; GWR and RA Volumes; CHRW Buyback; ODFL
FDX announced it would offer voluntary buyouts to U.S. Express and Services (support) employees as another step in its broader U.S. restructuring. After speaking with mgmt., we sense total headcount reductions could ultimately be similar with FDX’s past restructuring in F04 and we continue to roughly estimate around $1.00 of annual EPS savings from its pending restructuring, with the bulk of cost savings unlikely until late F13. RRTS announced the acquisition of Expedited Freight, a regional asset-based LTL carrier for $10M. We estimate RRTS paid about 4x forward EBITDA (before earn-outs) for Expedited and we expect about $0.03 of annual EPS accretion. This marks RRTS’s 2nd acquisition in the past 2 weeks and 9th since its IPO 2 years ago. Last week, WAB and CGI also announced small acquisitions which we discuss below.
The large-cap rails beat expectations by 14% on avg. in 1Q, but 2Q Cons. estimates for the group have come down modestly since then the past 3 months. While coal vols have weakened further in 2Q and easy weather comps have normalized, fuel prices have come down materially. We are raising our 2Q EPS estimates on avg. by 4% for the large-cap rails (ex-CP) and we are now 2% above Cons. We expect the best report vs. expectations for UNP and the worst report for CP following a 9-day strike in June.
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.
Welcome to our Friday Freight report. We distribute this product each Friday mid-day, so clients have some freight reading material to make their weekends truly worthwhile! We always appreciate your feedback if you have any suggestions. Have a great weekend! 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.
This 82-page report analyzes the responses from nearly 140 traffic managers that filled out our fourth-quarter survey during October and early November. Within the report, we discuss in detail: pricing, volume, service and capacity trends across all modes of freight transportation. The report looks at inventory restocking trends and how they are currently driving reported freight volumes compared to the broader economy. Our report also reveals a clear dichotomy between TL capacity and pricing compared with LTL.
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