This audio brief focuses on Canadian Pacific and CEO Hunter Harrison’s plan to turn its fortunes around over the next 4 years
In this audio brief we examine Hunter’s prior turn around experiences at the Illinois Central and Canadian National as well as the recent turnarounds by UNP, CSX and KSU and prior to that BNI and NSC. We look at the current actions CP management has already taken to reduce people, cars, locos, yards and other assets from the network to improve its cost/productivity while improving service to its customers. In addition we look at future actions management has announced it will take to build larger trains with fewer train starts and to monetize non-essential assets which should drive cash flow growth even above the 30% EPS CAGR we project.

We see tremendous upside to CP’s stated goal of a 65% OR by 2015, even prior to a potential rebound in Asian demand, to which CP has the greatest rail exposure.

We view CP’s as the only originating railroad out of the Bakken and with its exposure to the Canadian oil sands as having arguably the best crude to oil story of the Class I rails that should help generate strong volume growth in high margin, return business over the next few years regardless of the economy.

So despite CP’s stock up about 50% YTD and its 17x forward P/E, we see a multi-year opportunity for investors at CP similar to what investors enjoyed during the multi-year 1000+bp OR turnarounds witnessed by each of the other rails over the past two decades. We urge investors to spend the time so they don’t miss out by not participating.

This audio brief focuses on the recently completed West Coast Ports strikes at the ports of LA and Long Beach and the impact it may have on transports earnings during 4Q and potentially beyond.

In this audio brief we examine the impact to the different transport companies from the 2002 West Coast port lockout and compare the similarities and differences of the two events.

In addition, through the results from our short survey we conducted over this past weekend, we discuss the potential for the recent west coast strike to embolden the East and Gulf port dockworkers to strike when their temporary truce expires on 12/29. Recall that the Eastern and Gulf port dockworker’s contract originally expired in September. Those dockworkers voted yesterday the authority for union leadership to call for a strike as of 12/29, if no deal is reached.

With the Western port strike freshly on their minds, what actions are traffic managers now taking in advance of what is increasingly feeling like could be a strike in three weeks at the Eastern and Gulf ports…

This audio brief focuses on tidbits uncovered from our quarterly survey of shippers.

Each of the slides today comes from our 85 page State of the Freight report which we published on November 16th and was based on the responses from about 150 traffic managers during the five week period from October through early November. This quarter’s survey unearthed some interesting responses to both near term trends about pricing and capacity and expectations about the impact of Hurricane Sandy and storm recovery on freight, as well as some interesting views on some longer term secular changes traffic managers expect for freight over the next five years, which we will discuss towards the end of this brief. Freight valuations remain historically compelling and the storm likely has tightened Truckload capacity at a modest cost to intermodal in the near term.

This audio brief focuses on on FDX’s announced cost savings plan.

This short audio brief first looks at FedEx Ground’s market share gains and SmartPost growth and FDX’s ability to continue to take share and we believe this remains sustainable going forward. Next we spend most of the brief examining the five buckets of cost savings that FDX displayed for investors at their Investor Day on October 9th and 10th. We examine the expected timing and likelihood of success by bucket for FDX to achieve the full $1.6 Billion ($3.09/share) of total savings. Our conclusion is that FDX should achieve more than half of the cost savings it has announced over the next four years, even in a continued weak freight environment.

Our year end 2013 target price for FDX remains $125 or 15x its then forward year C14 EPS forecast of $8.35. This assumes no pick up in the U.S. economy and that FDX achieves less than 30% of its currently announced full $1.6B in cost savings by the end of C14.

This audio brief focuses on our recent upgrade of C.H. Robinson (CHRW, rated Outperform).

We upgraded CHRW because we believe that two impending catalysts are likely to help drive CHRW back towards mid-double digit EPS growth over the next few years. We expect that improved earnings growth combined with a still market leading near 30% Return on Total Capital and Return on Total Cash Flow, should help drive CHRW’s stock upward, after over four years of gradual multiple contraction. Our audio brief outlines these catalysts and looks at why we expect CHRW’s stock to return to a period of strong market outperformance regardless of the business climate, similar to the 1999-2002 period after CHRW announced and then closed its only prior transformational acquisition since its 1997 IPO.

This audiobrief focuses on the recent under performance of the transport sector and why we believe this is an opportunity and not a time to panic about the economy or the group after a string of high-profile pre-reports the past two weeks. The last time our sector saw 7 downside pre-reports was 4Q:08 and the group quickly rallied back well ahead of the market. With 2009 as our guide, we see a buying opportunity for the sector again into reduced expectations and poor sentiment.

In this audiobrief we examine the recent bellwether pre-reports of NSC and WERN to determine what drove them. While weak demand, decelerating spot rates and a big negative swing y/y from fuel should hurt most transports reports and guidance in 3Q, expectations were materially too high for NSC and WERN and we don’t expect other misses of the same magnitude across the group.

We have already lowered our estimates for most names in our coverage but to date the sell side has not lowered estimates much beyond those companies who have pre-reported. Expect estimates to come down over the next few weeks but for the stocks to be resilient as much bad news now feels priced into the group, just as some signs of improvement in demand and a flattening of fuel trends seems upon us.

Today’s brief focuses on the recent slowdown in freight and why we remain bullish on the stocks despite Consensus 3Q earnings estimates for most transports likely to need to come in 5%-10% over the next few weeks. In the past week ABFS, LSTR and FDX have pre-reported—more downside pre-reports than we had combined in our sector during 1H:12…and that’s with three weeks still remaining in the quarter! International freight remains weak and inconsistent, despite easing comparisons. Domestic truck, rail and airfreight vols remain less weak and a lot more consistent, but have clearly slowed in recent months. With little volume, price stagnation is inevitable and there is little good news to offset rising y/y fuel drags.

So Why do we expect freight volumes to feel a bit better in 5 or 6 weeks when transport companies are reporting earnings, than they do today? As we display in this audio brief, inventory remains pretty balanced so any improvement in demand should be amplified by inventory replenishment relative to recent months. Further, peak season is likely to arrive in late September given the actions that the shippers we surveyed have already taken for moving freight into the Eastern ports early and diverting some freight to the West, Canada and even Mexico. Truckers in the west and intermodal providers should benefit even if a strike never occurs. If a strike occurs it should be short in an election year and there are different winners and potential losers…