This weekly report summarizes the most recent views and research of Wolfe Research. Included are (1) three to five snippets or key takeaways from our team's recent channel checks with traffic managers about their experiences with purchasing, competition, and service from Airfreight and Logistics, Rail, and Truck capacity providers; (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 and logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.

Total Week 47 Rail vols increased 3.6% y/y, up from -9.6% and -8.1% the past 2 weeks and -4.1% QTD. We believe the y/y improvement was driven entirely by a very easy comp that included Thanksgiving in the year-ago period. Next week's data should be materially worse including Thanksgiving this year and a 2-week analysis will be more balanced. Looking forward, the rails should benefit from easier comps the final 3 weeks of the year.

The U.S. auto industry is hanging on for dear life, and we believe the transports would be negatively impacted beyond the market if the auto bailout does not occur. In this note, we discuss total Auto Rev. exposure for each of our 31 companies under coverage. Generally, the transports have been diversifying away from autos and the Big 3 automakers over the past several years.

YRCW announced a tender offer to purchase up to $100M of its 5% and 3.375% Contingent Convertible (CoCo) Senior Notes, with $387M total outstanding and its 8.5% USF Senior Notes, with $150M outstanding. YRCW expects to purchase about $230M face value of the bonds, implying an avg. purchase price of $0.435 on the dollar.

This weekly report summarizes the most recent views and research of Wolfe Research. Included are (1) three to five snippets or key takeaways from our team's recent channel checks with traffic managers about their experiences with purchasing, competition, and service from Airfreight and Logistics, Rail, and Truck capacity providers; (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 and logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.

Total Week 46 Rail vols declined 9.6% y/y, down vs. -8.1% and -6.2% the past 2 weeks. This marks the worst y/y week for rail vols since 1Q:02. Vols are now down 5.1% QTD, sharply worse than -2.6% last qtr. All segments deteriorated y/y vs. recent trends, led by material drop-offs in intermodal and metals vols. Y/y comps remain tough for the next couple of weeks before easing the final 3 weeks of the year.

Our sense is that investors are not only deleveraging out of the rails but also increasingly shorting the group as the rails have held up much better YTD than commodity stocks such as coal and steel, which the rails move. All transports would likely be negatively impacted beyond the market if the auto industry bailout does not occur.

YRCW ended 3Q:08 at 3.2x debt/EBITDA, dangerously close to its year-end credit covenant level of 3.5x, and economic trends have since deteriorated. We believe that YRCW is likely to take further action in the near term to reduce debt and avoid a covenant breach.

This weekly report summarizes the most recent views and research of Wolfe Research. Included are (1) three to five snippets or key takeaways from our team's recent channel checks with traffic managers about their experiences with purchasing, competition, and service from Airfreight and Logistics, Rail, and Truck capacity providers; (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 and logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.

Total Week 45 Rail vols declined 8.1% y/y, down vs. -6.2% and -4.5% the past 2 weeks. Rail vols are now down 4.3% QTD, worse than -2.6% last qtr. This week's further deterioration was driven primarily by tougher comps and weakened intermodal vols into a slowing economy. Comps will remain tough for the next several weeks before easing materially the final 3 weeks of the year.

CP hosted its 7th annual investor workshop yesterday in Toronto. The meetings focused mostly on the long-term value of CP's bulk franchise and more near-term opportunities to reduce costs as the economy remains weak.

YRCW's stock was down 16% yesterday after Moody's lowered its corporate credit rating from Ba2 to B1 with a negative outlook. While Moody's rating alone does not cause a "trigger event" under YRCW's credit agreement, this is below the level which would cause such an event, which increases the facility's collateralization to include rolling stock (trucks and trailers) and all remaining real estate. However, the additional requirement for a trigger event is a rating of BB- or lower by S&P, which currently rates YRCW BB and is on negative watch. YRCW's interest costs under the credit facility are also linked to its debt ratings and would rise about 20-30bp as a result.

Last week we hosted meetings in NY with FDX's VP of IR Mickey Foster. Generally, he was upbeat despite the current economic and financial challenges. He noted FDX's expectations for share gains from DHL, and YRCW, a big tailwind from fuel, recent withdrawal by the IRS of its $319M tentative assessment against FDX related to its Ground contractors, and hope for further awarded USPS business over the next 6 months.

This weekly report summarizes the most recent views and research of Wolfe Research. Included are (1) three to five snippets or key takeaways from our team's recent channel checks with traffic managers about their experiences with purchasing, competition, and service from Airfreight and Logistics, Rail, and Truck capacity providers; (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 and logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.

Total Week 44 Rail vols declined 6.2% y/y vs. -4.5% and -4.3% the past 2 weeks. Rail vols are now down 3.6% QTD, worse than -2.6% last qtr. This week's further deterioration was driven mostly by tougher comps and weakened intermodal vols into a slowing economy. Note that y/y comps will remain tough for the next several weeks before easing in last 3 weeks of the year.

EXPD reported about 5% above Cons. expectations. Net Rev., EBIT and EPS grew by 12%, 13% and 17% accelerated from 12%, 11% and 9% y/y in 2Q. The $0.03 upside to our number was driven by $0.02 better Operating Margin (strong cost control and fewer legal fees we suspect) and $0.01 better than expected below the operating line.

CNW announced major network re-engineering to reduce its terminal count from 343 to 303 and remove 124K miles per day from its system (about 5%). CNW is proactively seeking to reduce geographic overlap and generate operating improvement through cost reduction in a likely protracted weak tonnage env't.

GWR reported $0.55, solidly above Cons. of $0.47 and our estimate of $0.46. GWR beat us on better than expected Rev. and margins, but also benefited by $0.02 from gains on asset sales and $0.01 from a tax benefit. As reported, Rev., EBIT and EPS grew by 21%, 38% and 37%, materially accelerated from 22%, 30% and 15% growth during 2Q.

This weekly report summarizes the most recent views and research of Wolfe Research. Included are (1) three to five snippets or key takeaways from our team's recent channel checks with traffic managers about their experiences with purchasing, competition, and service from Airfreight and Logistics, Rail, and Truck capacity providers; (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 and logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.

Total Week 43 Rail vols declined 4.5% y/y, down vs. -4.3% and -1.7% the past 2 weeks. This marks another step down from -3.9% over the past 6 weeks and -2.3% YTD. The weakening overall economy and persistently weak grain vols continue to work against the rails.

In this note, we begin with a look at historical transport stock performance under the past 7 presidential terms dating back to 1980. We also look at the major transportation/infrastructure issues facing the next President, including highway reauthorization, rail re-regulation vs. infrastructure investment, clean coal regulations, NAFTA and labor-related issues. We also discuss what we know about the two Presidential candidates' transportation records and platforms.

KSU reported 3Q EPS of $0.52, well below Cons. of $0.60 and our recently reduced $0.59. KSU was hurt in the quarter by $0.05 from foreign exchange losses (not in our model) and $0.07 from Hurricanes Ike and Gustav. Rev., EBIT and EPS grew by 11%, 13% and 9%, each below our expectations and decelerated from 14%, 26% and 50% y/y growth during 2Q.

CP reported ongoing 3Q EPS of $1.16, solidly above Cons. $1.04 and our $1.07. Rev., EBIT and EPS changed by +6.5%, -6% and -2% (CAD), each materially improved from +0%, -18% and -13% y/y during 2Q. This was also above our expectations of +6%, -12% and -9%. Note that this excludes +$0.04 from FX gains on L/T debt and ($0.12) of write-downs on asset-backed commercial paper.

PACR reported ongoing EPS of $0.49 compared to Cons. $0.42 and our $0.44. Gross Rev., EBIT and EPS grew by 14%, 12% and 15%, accelerated from 9%, 8% and 15% y/y growth in 2Q. We suspect a material y/y net fuel benefit was the driver of the upside report, but mgmt gave little guidance on fuel other than it would become a major relative headwind in 4Q. Cash flow remained solid.

TNT reported 3Q EPS of €0.31 compared with Cons. Euro 0.42 and our Euro 0.38. TNT had previously reported on Oct. 16th that European Express trends had materially weakened in Sept and Oct., w/o providing an earnings range at that time. Rev., EBIT and EPS changed y/y by +1%, -18% and -27% in 3Q decelerated from +4%, -2% and -7% y/y in 2Q.

SAIA reported $0.21 3Q EPS vs Cons $0.19 and our $0.22. Rev., EBIT and EPS changed +11%, -31% and -41% compared to +9%, -25% and -30% y/y during 2Q. Relative to our high end estimate Rev. growth driven by fuel surcharge was higher while margin slightly worse than our projection.

This weekly report summarizes the most recent views and research of Wolfe Research. Included are (1) three to five snippets or key takeaways from our team's recent channel checks with traffic managers about their experiences with purchasing, competition, and service from Airfreight and Logistics, Rail, and Truck capacity providers; (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 and logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.

Total Week 42 Rail vols declined 4.3% y/y, down vs. -1.7% and -1.2% the past 2 weeks and -3.9% the past 6 weeks. On top of a weakening economy and continued weak grain vols, this week's data was hurt by the timing of the Canadian Thanksgiving. Canadian rail vols deteriorated sharply and were down 9.7% vs. -3.3% the past 6 weeks.

UPS reported $0.96 vs. our $0.87 and Cons. $0.89. This represented y/y Rev., EBIT and EPS changes of +7%, -7% and -9% y/y, improved from 2Q. Upside relative to our expectation was driven $0.08 from Dom. Package, and $0.01 from Int'l Package, while SCS was in line. We estimate UPS benefited by about $0.11 y/y from net fuel impact.

Thursday night, BNI reported ongoing 3Q EPS of $1.91, materially beating Cons. of $1.69 and our estimate of $1.66. Rev., EBIT and EPS grew 21%, 21% and 29%, each up materially from 17%, 7% and 11% growth during 2Q. Relative to our model, BNI beat by $0.08 from higher Rev., $0.15 from better margin and $0.02 from lower int. expense and tax rate.

UNP posted 3Q results 6% above both us and Cons. and modestly above its prior pre-report range. Rev., EBIT and EPS grew 16%, 27% and 38%, each accelerated from +13%, +18% and +20% last qtr. The quality of the beat was mixed as UNP benefited by $0.05 vs. our model from a lower tax rate and share count. The $0.08 impact from hurricanes was $0.02 less than expected.

YRCW reported what we consider on an on-going basis a loss of ($0.21) compared to our ($0.10) and Cons. ($0.03). If we exclude $8.2M of net gains on sales and settlements broken out at each division (which were heavier than normal) arguably the on-going loss was more like ($0.32). Rev, EBIT and EPS were down 3%, 111% and 130% y/y, despite easy comps and our rough estimate of a $0.35 y/y fuel benefit.

Thursday before the market, ODFL reported 3Q EPS $0.63 vs our $0.48 and Cons $0.54. Rev., EBIT and EPS grew 15%, 25% and 17% vs our +14%, -3%, and -10% ests and +17%, +11% and +12% in 2Q:08. ODFL is operating well in a continued difficult pricing environment, but we believe fuel is primarily responsible for the upside.

UACL reported 3Q EPS of $0.34 in-line with Cons. but well above our estimate of $0.28. Rev, EBIT, and EPS grew by 24%, 7%, and 5%, all above 2Q growth of 12%, 3%, and 0.5%.. The upside to our expectation was mostly ($0.04/share) driven by higher than expected Rev. growth (24% vs. 9%) driven by Brokerage, as well as modestly better OR ($0.01/share) than our assumption. UACL also benefitted from y/y fuel benefit.

R reported $1.22 EPS compared to our $1.23 and Cons. $1.27. Rev, EBIT and EPS grew by -1% (+3% on-going), 5% and 7% decelerated from 0% (+2% on-going), 14% and 14% during 2Q. Reported Pretax was in-line with our forecast with the $0.01 downside from a higher share count as Mgmt has suspended its repurchase plan.

CNW reported $0.81 EPS vs our $0.64 and Cons. $0.66. Rev, EBIT and EPS grew by +23%, +6% and -7% accelerated from +25%, +11% and -5% y/y change in 2Q. CNW benefited by about $0.04 from a lower than expected tax rate and about $0.02 from lower employee expenses, so on-going it was more like $0.75, still solid upside to recently lowered forecasts.

ABFS Reported 3Q EPS of $0.61 vs. our $0.47 and Cons. $0.64. Rev., EBIT and EPS changed +2%,-10% and -19%, a deceleration from +9%,-15% and -8% y/y changes in 2Q. On and operating basis EPS was arguably about $0.05 better than our low end estimate.

KNX reported $0.19 EPS compared to Cons and our $0.16 expectations. Rev, EBIT and EPS grew y/y by 16% (3% net of fuel), 12% and 12% compared to +14% (+1% net of fuel), -29% and -29% y/y during 2Q:08. A better than expected net fuel and insurance claim impact drove most of the upside relative to our expectation, in addition to improved operating performance (utilization and deadhead).

HUBG posted 3Q earnings of $0.45, in line with Cons. but $0.02 below our high-end estimate. Net Rev., EBIT and EPS grew 10%, 10% and 7% (15% EPS growth ex. tax benefit a year-ago), vs. +4%, +9% and +15% during 2Q. Stronger Gross Rev. added $0.02 relative to our model, while gross yields, OR and share count missed our expectations by about $0.04 combined.

We believe DHL is close to a major withdrawal from the former Airborne, U.S. Dom. Package business, beyond its prior May announcement. Within weeks we expect DHL could begin exiting the U.S. ground business entirely and possibly also the Dom. Air Express business, leaving itself with basically only import/export express rev., as it was prior to Airborne in C02.

CHRW reported $0.54 EPS compared to Cons. $0.53 and our $0.52. Net Rev., EBIT and EPS improved 12%, 13% and 12%, each modestly accelerated from 2Q. The $0.02 upside relative to our expectation was from higher Gross Rev. partially offset by worse Net Operating Margin and better Other Income, which should be on-going.

NSC posted $1.37/shr., solidly above our high-end $1.25 and Cons. of $1.21. Rev., EBIT and EPS grew by 23%, 31% and 34%, each materially accelerated from 16%, 16% and 21% y/y growth in 2Q. NSC also generated $600M ($1.58/shr) of free cash flow in the qtr.

CNI reported 3Q EPS of $1.03, solidly above Cons. $0.95 and our $0.97. Rev., EBIT and EPS grew by 12%, 10% and 15% (CAD), each materially accelerated from +4%, -13% and -5% y/y during 2Q. The quality of the report was even better than reported as CNI beat our estimate by about $0.10 on an operating basis.

CLDN reported EPS of $0.13, vs. our and Cons. $0.12. Rev, EBIT, and EPS grew 10% (-4% net fuel), 17%, and 22%, improved sequentially from +17% (+3.5% net fuel), -43% and -54% in 2Q. Arguably the qtr was even a penny or two better as its volatile tax rate was higher than we expected.

FWRD reported 3Q:08 EPS of $0.42, vs. our $0.36 and Cons $0.43. Rev, EBIT, and EPS, aided by acquisitions, grew 24%, 14% and 15% y/y during 3Q, accelerated from 31%, 11%, and 9% in 2Q:08. The $0.06 EPS beat to our low end expectation resulted from roughly $0.01 better than expected Rev. growth, $0.04 from better OR and $0.01 from a lower tax rate.

HTLD reported 3Q EPS $0.19 vs. our $0.17 and Cons. $0.17. Rev., EBIT and EPS grew 16% (+3% estimated net of fuel), 8% and 11% material acceleration from +10% (-1% estimated net of fuel), -26% and -21% y/y change in 2Q.

UPS announced a 5.9% Ground list increase for C09, above its proposed 4.9% increase for C08 and the 3.9% average proposed since C01. Over the last few years UPS has announced larger than historical Ground list increases, but maintained less than 50% asked for (net of fuel).

This weekly report summarizes the most recent views and research of Wolfe Research. Included are (1) three to five snippets or key takeaways from our team's recent channel checks with traffic managers about their experiences with purchasing, competition, and service from Airfreight and Logistics, Rail, and Truck capacity providers; (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 and logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.

Total Week 41 Rail vols declined 1.7% y/y, vs. -1.2% and -3.6% the past 2 weeks and -4.0% the prior 6 weeks. Our sense is that the drags from the hurricane are largely behind the rails, and vols are holding up relatively well into easy comps but a clearly weakening economy.

Before the market yesterday, WERN reported $0.31 EPS vs. our $0.29 and Cons. $0.26. Rev, EBIT and EPS grew y/y by +14.5%, 3% and 5% improved from +9%, -20% and -15% y/y in 2Q:08. Higher than expected gains on sales added a $0.01, which was offset by a higher share count which dragged EPS by $0.01 relative to our expectations.

LSTR reported $0.62 EPS well above our $0.55 and Cons. $0.59. The $0.62 included $0.03 of hurricane bus relief rev. as well as $0.03 of a drag as expected from higher employee bonus accruals. The $0.07 upside to our estimate resulted roughly $0.04 from better OR and $0.03 from better than projected Rev. Both its BCO and Brokerage businesses outperformed our expectations.

Yesterday evening, CSX reported 3Q EPS of $0.94, $0.01 above Cons. and $0.04 above our GAAP estimate. This includes about a $0.07 drag from Hurricanes Ike and Gustav. As reported, Rev., EBIT and EPS grew by 18%, 32% and 40%, each accelerated from 15%, 17% and 25% growth during 2Q. Cash flow was excellent.

JBHT reported 3Q:08 EPS of $0.47 compared to our $0.40 forecast and Consensus of $0.42. The $0.07 EPS upside to our expectation resulted roughly $0.04 from Intermodal, $0.02 from Dedicated and $0.01 from a lower tax rate. Truck was in line with our low expectations.

Even after Monday's record market rally, 14 of our 31 transport stocks are currently trading below their 10-year avg. valuations on our materially reduced estimates. Our sense is that the stocks are discounting a deep recession in C09 and that soon the market will stop focusing on credit issues and instead look towards which companies can outperform into sustained depressed demand.

This weekly report summarizes the most recent views and research of Wolfe Research. Included are (1) three to five snippets or key takeaways from our team's recent channel checks with traffic managers about their experiences with purchasing, competition, and service from Airfreight and Logistics, Rail, and Truck capacity providers; (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 and logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.

The stock closed last night 13% below our downside year-end C08 target price of $77. While we believe EPS numbers need to come down for virtually all transports including FDX into a global recession, we believe FDX's stock now discounts a recession for 2009.

Total Week 40 Rail vols declined 1.2% y/y, less worse than -3.6% and -8.3% the past 2 weeks. Our sense is that most of the hurricane-related weakness the past 6 weeks has subsided, but weakened overall demand continues to weigh down vols despite easy comps.

Last week, UNP priced $750M of 7.875% notes due Jan. 2019. The 7.875% interest rate is up from the 6.2% avg. for the past 5 large-cap rail debt issuances this year. Still, the deal was oversubscribed which is likely a good sign for the rails' ability to access the debt markets. Yesterday, S&P assigned a BBB rating to the notes, in line with UNP's corporate credit rating.

This weekly report summarizes the most recent views and research of Wolfe Research. Included are (1) three to five snippets or key takeaways from our team's recent channel checks with traffic managers about their experiences with purchasing, competition, and service from Airfreight and Logistics, Rail, and Truck capacity providers; (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 and logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.

Total Week 39 Rail vols declined 3.6% y/y, less worse than -8.3% and -4.1% the prior 2 weeks. The rails have started to rebound from Hurricane Ike as chemicals and grain vols increased 20% and 10% sequentially vs. last week. Vols finished 3Q down 2.6% y/y, deteriorated slightly from -2.4% in 2Q.

We are upgrading CHRW to Outperform and establishing a $60 year-end C09 target (15 month target price). We believe CHRW's recent pullback with the market offers investors a rare opportunity to own one of the highest quality companies and business models across any industry, at well below historical valuations.

We lowered our 3Q EPS estimate on KSU due to lost Rev. following Hurricane Ike. We also kept our Peer Perform rating on the stock... "remaining patiently on the sidelines" for a better entry point. It turns out, we didn't have to wait long: Following yesterday's 18% decline in the stock, we now strongly recommend buying KSU for its unique growth opportunities that should drive solid EPS gains the next 3-5 years regardless of the economy.

JBHT's stock was down 13% yesterday into a day of transport stock carnage sparked by CNW's downside pre-report and clear evidence of a weakened domestic economy. JBHT and the transports also suffered from continued investor selling pressure (see more below). JBHT is now down 28% from recent highs, and closed yesterday 3% below our former year-end C08 downside target price of $30.

We are upgrading shares of ODFL to Peer Perform from Underperform as the stock closed 17% below our prior $29 year-end 08 target price yesterday. The 15% drop in ODFL's stock yesterday followed CNW's 29% reduction in 2H:08 guidance into a very tumultuous market.

We are upgrading shares of CNW to Peer Perform from Underperform as the stock closed 24% below our prior $45 year-end 08 target price yesterday. The 20% drop in CNW's stock yesterday followed a 29% reduction in 2H:08 guidance and a slew of analyst downgrades, which seems like an overreaction to us. We believe a lot of bad news is now discounted in the stock.

CNW provided revised C08 guidance 16% lower than prior full year guidance, implying expectations 29% below prior Cons for 2H:08. Mgmt noted that Sept LTL tonnage was worse than July and Aug for the first time in memory. TL ops are also below plan but should see a bigger near term fuel benefit. Menlo Logistics is also below plan as a result of issues with integration in China.

We recently hosted meetings with KSU and while mgmt was cautious on near-term results following Hurricane Ike, the long-term outlook remains very positive regardless of the macro economy. KSU's vols were tracking strongly positive y/y in 3Q prior to the hurricane (vs. the large-cap rails whose vols are down 2.5% QTD), driven largely by ramping business out of Lazaro Cardenas and a new chemicals contract w/ XOM.

Our sense is that F3Q is moving forward with few surprises despite decelerating global demand. Mgmt's guidance had provided for a slow down in demand, solid air and ocean gross yield improvement, and operating margin improvement driven by its cost savings initiatives. Our sense is there is nothing yet surprising and plans remain on track.

The Wolfe Monthly Macro Watch summarizes the most recently available Air, Ocean, Rail & Truck freight statistics. Each month, we track 14 series of domestic and international freight data.

This weekly report summarizes the most recent views and research of Wolfe Research. Included are (1) three to five snippets or key takeaways from our team's recent channel checks with traffic managers about their experiences with purchasing, competition, and service from Airfreight and Logistics, Rail, and Truck capacity providers; (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 and logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.

Total Week 38 Rail vols declined 8.3% y/y, down materially from -4.1% the past 2 weeks. This is the worst week of y/y vols for the rails since the West Coast port shutdowns in the Fall of 2002. Vols are now down 2.5% QTD, vs. -2.4% in 2Q. Vols have deteriorated sharply following the hurricanes, with the biggest impact on UNP and KSU followed by BNI and CSX.

NSC's vols are tracking down about 1% in 3Q, improved from -2.1% last qtr. and -3.3% on avg. the past 7 qtrs. Excluding a 31% drop in lower-margin auto vols, NSC's vols would be trending up 1% in 3Q. NSC's vols were the 1st to turn negative in the U.S. and we expect them to be 1st to turn positive.

Despite signs of another step down recently in freight demand and flat pricing, HUBG mgmt seemed confident to us, as it continues to benefit from new account signings in 1Q, a revamped sales force, improved productivity and a strong balance sheet. We have conviction in our 7% and 9% above Cons. 3Q:08 and C09 EPS forecasts.

Yesterday evening, CSX announced that the combined impact of Hurricanes Ike and Gustav would reduce 3Q EPS by $0.06-$0.08. This includes a non-cash write down for damaged track in the Gulf, as well as lost chemicals business out of Houston and some re-rerouting and clean-up costs. The impact from the hurricanes was bigger than expected as CSX did not anticipate lost chemicals business out of Houston following Ike.

Last night, UNP pre-reported 3Q EPS in a range of $1.28-$1.33, well above prior guidance of $1.10-$1.20 and prior Cons. of $1.21. UNP will benefit by about $0.10 from declining fuel prices in 3Q, offset by a $0.10 reduction related to Hurricanes Ike and Gustav. Core earnings also continue to benefit from ongoing efficiency gains and a favorable business mix.

Last week we met with senior mgmt at WERN, a high-quality TL and increasingly logistics’ provider. The truck vol. and pricing environment has softened during 3Q compared to the end of 2Q, but WERN remains well positioned with a reduced fleet, tight cost control and increased focus on its intermodal, brokerage, forwarding and Dedicated businesses.

Generally we see little direct material exposure to the transport sector from failed financial institutions or increasingly tight or expensive financing. Overall the balance sheets of the 31 public transport companies that we cover are solid, and they have long-lived, but relatively liquid assets (railcars, trucks and planes) that can serve to collateralize funding, if necessary.

This weekly report summarizes the most recent views and research of Wolfe Research. Included are (1) three to five snippets or key takeaways from our team's recent channel checks with traffic managers about their experiences with purchasing, competition, and service from Airfreight and Logistics, Rail, and Truck capacity providers; (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 and logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.

Total Week 37 Rail vols declined 4.1% y/y compared to -4.1% and -2.5% the past 2 weeks. Vols are now down 1.9% QTD (vs. -2.4% in 2Q). Vols remain weak into continued soft import/consumer demand and more recently, weak grain into tough comps and low stockpiles. We believe most of the deterioration the past 2 weeks was related to recent hurricanes.

FDX reported F1Q (Aug. qtr.) EPS of $1.23 in-line with its pre-report. Rev, EBIT and Continuing EPS in F1Q changed 8%, -22% and -22% y/y (including an estimated $0.18 benefit y/y from fuel). On an operating basis vs. our expectations, Ground provided $0.07 upside, Freight (LTL) $0.01 upside, Express $0.09 downside. FDX had one fewer operating day y/y in the qtr.

Yesterday, CSX announced that it would immediately seat the remaining 2 TCI/3G nominees - Chris Hohn and Tim O'Toole - to the Board. This follows a Court decision on Monday not to block any of the TCI/3G shares from the proxy vote. The proxy battle has now concluded with 4 of 5 TCI/3G nominees added to the Board, which is scheduled to meet shortly.

We spoke with mostly all of our companies and several shippers yesterday to get an early sense of the impact from the storms. While there was less infrastructure damage as compared with Hurricanes Katrina and Rita, power remains out and chemical production remains shut across much of the TX Gulf. We expect the greatest impact to operations/vols for the Rails followed by the LTL's and then TL's. LSTR should again benefit from relief support as they did with Hurricane Gustav.

This weekly report summarizes the most recent views and research of Wolfe Research. Included are (1) three to five snippets or key takeaways from our team's recent channel checks with traffic managers about their experiences with purchasing, competition, and service from Airfreight and Logistics, Rail, and Truck capacity providers; (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 and logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.

Yesterday morning, CSX raised its C08 guidance from $3.60 to $3.70-$3.75, solidly above prior Cons. of $3.57 and in-line with our prior high-end estimate of $3.73. CSX also increased its capex budget by $150M to $1.75B to account for increased coal car orders and repair costs following Hurricane Gustav.

Total Week 36 Rail vols declined 4.1% y/y, worse than -2.5% and -1.6% the past 2 weeks. Vols are now down 1.7% QTD, still improved vs. -2.4% in 2Q. Rail vols remain muted into continued soft import/consumer demand and more recently, weak grain into tough comps and low stockpiles. We believe most of the deterioration this week is related to recent hurricanes. There may also be some volatility around the Labor Day holiday.

Last night, FDX announced it expects to generate $1.23 EPS during F1Q:09 (August) compared to our $1.08, Cons. $0.98 and prior guidance of $0.80-$1.00. This equates to a 22% y/y decline in EPS similar to last qtr's y/y decline of 24%, despite the big swing in net fuel impact sequentially.

The Big 4 U.S. Rail stocks were down 6.8% yesterday vs. the S&P 500 down 3.4%. The group is now down 11.5% over the past 5 trading days vs. the S&P down 4%.

YRCW reduced its 3Q on-going profitability expectation to a slight EPS loss from core operations, prior to $0.06-$0.08 from its latest severance charges which we treat as ongoing given recent 5 year history. This is down from guidance of +$0.35-$0.45 issued just 6 weeks ago.

We recently travelled with R's Mgmt and have strong conviction that R's revamped long term processes installed over the past 7-8 years and proactive measures in reducing its CR fleet and number of non-rev. generating trucks for sale, position it well going forward.

This weekly report summarizes the most recent views and research of Wolfe Research. Included are (1) three to five snippets or key takeaways from our team's recent channel checks with traffic managers about their experiences with purchasing, competition, and service from Airfreight and Logistics, Rail, and Truck capacity providers; (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 and logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.

Relative to our expectations, UTIW reported in-line Gross Rev. growth (20%) but better than expected Net Rev. growth (14%, compared to our 10.5% expectation) driven by 80bp better Gross Yield offset by 30bp worse Net OR.

Total Week 35 Rail vols declined 2.5% y/y, down from -1.6% and -0.8% the past 2 weeks. Vols are now down 1.5% QTD, improved vs. -2.4% in 2Q. Still, rail vols remain muted into continued soft import/consumer demand and more recently, weak grain. We believe some of the deterioration this week was likely related to hurricane preparations as the rails were positioning equipment out of the Gulf region. There may also have been some volatility ahead of the Labor Day holiday.

We attended the NITL's Rail Committee meetings last week in Toledo, OH and met with 60+ shippers. Our sense is that shippers remain frustrated with continued strong rail rate increases despite weak volumes. Fuel also continues to be a major focus. The NITL's Rail Compromise Proposal with the railroads remains in limbo.

The Wolfe Monthly Macro Watch summarizes the most recently available Air, Ocean, Rail & Truck freight statistics. Each month, we track 13 series of domestic and international freight data.

This weekly report summarizes the most recent views and research of Wolfe Research. Included are (1) three to five snippets or key takeaways from our team's recent channel checks with traffic managers about their experiences with purchasing, competition, and service from Airfreight and Logistics, Rail, and Truck capacity providers; (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 and logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.

Total Week 34 Rail vols declined 1.6% y/y, in-line with the average of the past two weeks which were -0.8% and -2.3%. Vols are now down 1.3% QTD, improved vs. -2.4% in 2Q. Still, rail vols remain muted into continued soft import/consumer demand and more recently, weak grain into tough comps and low stockpiles.

LSTR hosted its scheduled mid-qtr update cc yesterday. Revs have tracked up double digits y/y despite modestly decreased total loads. Pricing and fuel remained strong y/y accounting for the difference. Mgmt guided to 3Q rev growth of 10-13% (arguably up from previous guidance of high single to low double digits growth) following 10% y/y growth in 2Q:08, but below our prior high-end 3Q estimate of 16%.

This weekly report summarizes the most recent views and research of Wolfe Research. Included are (1) three to five snippets or key takeaways from our team's recent channel checks with traffic managers about their experiences with purchasing, competition, and service from Airfreight and Logistics, Rail, and Truck capacity providers; (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 and logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.

Total Week 33 Rail vols declined 0.8% y/y, relatively improved vs. -2.3% and -2.2% in the prior 2 weeks. Vols are now down 1.3% QTD vs. -2.4% in 2Q. Still, rail vols remain muted into continued soft import/consumer demand and more recently, weak grain into tough comps and low stockpiles.

This weekly report summarizes the most recent views and research of Wolfe Research. Included are (1) three to five snippets or key takeaways from our team's recent channel checks with traffic managers about their experiences with purchasing, competition, and service from Airfreight and Logistics, Rail, and Truck capacity providers; (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 and logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.

Total Week 32 vols declined 2.3% y/y, vs. -2.2% and -3.3% in the prior 2 weeks. Vols are now down 1.4% QTD vs. -2.4% in 2Q. Rail vols remain weak into continued soft import/consumer demand and more recently, weak grain into tough comps and low stockpiles.

CNW announced it had hired Steve Bruffett as CFO. We believe the addition of Bruffett strengthens CNW's mgmt team. Conversely, we view Bruffet's move from YRCW with caution given our concerns with YRCW's charge-riddled income statements the past several years and its second CFO departure in less than a year. YRCW's Corp, Controller and Chief Accounting Officer, Paul Liljegren, was appointed interim CFO.

We believe EXPD's long-term growth, cash flow and high-return model remains intact and that recent concerns about a slowing global economy are more than in the stock. We also believe its non-asset model is well positioned to relatively outperform, like past downturns, into weaker global vols, offset to some degree by likely improving Ocean and, to a lesser extent, Air Gross Yields.

The large-cap rail stocks have pulled back 6% on avg. over the past 2 days vs. the S&P 500 down 0.5%. The U.S. rails have fared worst, down 7% vs. the Canadian rails down only 3%. Still, our Large Cap Rail index remains up 19% YTD including the U.S. rails up 27% (vs. the S&P down 12%).

The Sunday Telegraph reported that UPS has informally approached TNT about purchasing it for about Euro10B ($15B) compared to Friday's closing EV of Euro11B ($17B). Recently, there has been increased press speculation about first FDX and now UPS purchasing all of TNT or its Express division. We have provided an informal merger model below, but believe at this point there remains little evidence of such a deal occurring.

This weekly report summarizes the most recent views and research of Wolfe Research. Included are (1) three to five snippets or key takeaways from our team's recent channel checks with traffic managers about their experiences with purchasing, competition, and service from Airfreight and Logistics, Rail, and Truck capacity providers; (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 and logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.

Total Week 31 vols declined 2.2% y/y, less worse than -3.3% last week, but weaker than -0.8% 2 weeks ago. Vols are now down 1.2% QTD vs. -2.4% in 2Q. Our sense is that recent make-up vols related to the Midwest floods are now behind the rails, who continue to feel pressure from weak consumer demand.

Slides from our 2Q Postview conference call, reviewing 2Q trends for volumes, yields, expenses and margins for Trucks, Rails and Airfreight & Logistics as well as our expectations and thesis for owning transports stocks in 2H:08. In addition, we updated valuations and where the different transport sub-sectors are currently compared to past economic and Fed cycles.

PACR reported 2Q EPS of $0.40, 11% above Cons. but below our high-end estimate of $0.45. Net Rev., EBIT and EPS grew 4%, 8% and 15% y/y, each materially decelerated from 8%, 52% and 71% growth during 1Q.

EXPD reported 6% below Cons. before the market yesterday. Net rev., EBIT and EPS grew by 12%, 11% and 9% modestly decelerated from 12%, 12% and 13% y/y during 1Q. Relative to our below Cons. estimate the $0.01 miss was related to costs resulting from higher than expected legal and related costs, which should be on-going for the foreseeable future.

GWR reported $0.44, in line with our estimate and a penny below Cons. This was below GWR's prior guidance of $0.45-$0.50, driven by a $0.04 headwind from fuel and $0.02 from missed coal vols following the Midwest floods. As reported, Rev., EBIT and EPS grew by 22%, 30% and 15%, each materially accelerated from 12%, -11% and -19% during 2Q.

CLDN reported F4Q:08 EPS of $0.10, vs. our $0.04 est and Cons $0.07. Rev, EBIT, and EPS changed +17% (3.5% net fuel), -43%, and -54% which was improved sequentially from +15% (+6.9% net fuel), -70% and -96% in a seasonally weak 1Q.

We brought clients to meet with CHRW senior mgmt at their HQ in Eden Prairie and we toured a branch office. Our discussions revolved around learning more about CHRW's model, its history and evolution, as well as recent gross yield pressure, and how the current truck cycle feels compared to historical cycles.

The Rail Safety Bill (S. 1889) was passed in the Senate by a unanimous voice vote. The bill would revise hours of service rules, reduce limbo time, establish training standards for all rail workers and implement positive train control regulations. While not draconian, we believe this bill will likely increase hiring needs for the rails and limit some future productivity gains.

This weekly report summarizes the most recent views and research of Wolfe Research. Included are (1) three to five snippets or key takeaways from our team's recent channel checks with traffic managers about their experiences with purchasing, competition, and service from Airfreight and Logistics, Rail, and Truck capacity providers; (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 and logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.

Total Week 30 vols declined 3.3% y/y, worse than -0.8% and -0.1% the past 2 weeks. This is also weaker than -0.9% QTD and -2.4% in 2Q. Our sense is that recent make-up vols related to the Midwest floods are likely now behind the rails. This week's drop-off was driven by a 3.2% decline in total carloads ex. intermodal (vs. +3.3% on avg. the past 3 weeks).

KSU reported 2Q EPS of $0.54, a nickel above our high-end estimate and 23% above Cons., excluding +$0.06 of insurance settlements and -$0.04 for debt retirement costs. Rev., EBIT and EPS grew by 14%, 26% and 50%, generally well above our estimates of 14%, 22% and 37%. This also compares with 10%, 15% and 81% y/y growth during 1Q.

This monthly report summarizes the most recently available Air, Ocean, Rail & Truck freight statistics. Each month, we track 13 series of domestic and international freight data.

CVTI reported ($0.17) EPS loss in 2Q:08, ahead of our ($0.20) est and Cons ($0.33). Arguably the loss was more like ($0.12) on an operating basis adjusting for $0.06 tax benefits not realized, offset by $0.01 lower net interest expense. Rev. grew 6% (18% incl fuel), up from 3.5% in 1Q:08 (9% incl fuel) and the EBIT and EPS losses shrunk by 98% and 79% y/y, following larger EBIT and EPS losses in 1Q:08.

TNT reported a clean 2Q EPS of Euro0.56 ($0.87) vs. Cons. Euro0.61 and our Euro0.60 ($0.94), including modest drags from fx and fuel of about (Euro14M pretax or Euro0.03) combined. Revenue, EBIT and EPS changed +4%, -2% and -7% modestly better than +2%, -12% and -12% y/y in 1Q, but with the benefit of 3 extra operating days y/y in Express during 2Q.

UACL reported 2Q EPS of $0.29 vs our $0.27 and Cons. $0.30. Reported GAAP EPS of $0.22 included a charge for the write-down of financial sector investments of $0.08. Rev, EBIT, and EPS grew by 12%, 3%, and 0.5% similar to 1Q growth of 7%, 2% and 5%. UACL beat our EBIT estimate by $1M or almost $0.04 with drags below the line from Other Income and modest drags from tax rate and share count.

SAIA reported EPS 125% above Cons and our low expectations into improved tonnage trends and better cost control. Rev., EBIT and EPS changed +9%, -25% and -30% much improved from 7.5%, -79% and -120% y/y during 1Q.

This weekly report summarizes the most recent views and research of Wolfe Research. Included are (1) three to five snippets or key takeaways from our team's recent channel checks with traffic managers about their experiences with purchasing, competition, and service from Airfreight and Logistics, Rail, and Truck capacity providers; (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 and logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.

Total Week 29 vols decreased 0.8% y/y, modestly worse than -0.1% and +0.7% the past 2 weeks. Vols are now down 0.1% QTD, improved from -2.4% in 2Q. Our sense is that the recent relative improvement vs. 2Q has been driven by easing comps, continued strong export/commodity demand and likely still some make-up vols following the Midwest floods.

UNP reported 8% above Cons. and the midpoint of its prior pre-report, and a penny above the high end of its original guidance range. Upside was driven by solid but in-line rev. growth and impressive cost control and margin improvement. Rev., EBIT and EPS grew 13%, 18% and 20%, each accelerated from 11%, 10% and 16% during the first quarter.

BNI reported continuing 2Q EPS of $1.34, above Cons. of $1.32 and our $1.30, but aided by the removal of a $0.03 personal injury accrual. This also compares with BNI's pre-report of $1.30 and its original target of $1.38-$1.43. Rev., EBIT and EPS grew by 17%, 7% and 11%, decelerated from 17%, 13% and 18% during 1Q.

HUBG posted $0.40, a penny above Cons. and in line with our high-end estimate. Net Rev., EBIT and EPS grew 4%, 9% and 15%, pretty much in line with our estimates of 2%, 9% and 16%. This also compares with 1%, 15% and 22% growth during 1Q. Arguably, a one-time strike cost HUBG almost $0.02 in 2Q.

ODFL reported at the high end of its July 16th pre-report range. EBIT and EPS were both up y/y for the first time in 5 qtrs. ODFL is operating well in a continued difficult pricing environment, and we have raised our EPS forecasts and downside TP, but at current above historical valuations, we see solid risk to the downside.

YRCW reported $0.62 EPS prior to a previously announced curtailment gain of $0.39 and $0.09 for a severe accident. The tax rate was also lower than we expected. We believe on-going EPS was arguably anything from $0.19 to $0.32, compared to Cons. $0.32, our prior $0.30 and $0.87 a year ago. We are using $0.23, which includes the accident impact and a 34.1% tax rate. Reported National and Regional LTL daily tonnage were down 10% and 18% vs -9% and -10% y/y in 1Q.

R reported $1.22 on-going EPS compared to $1.15 Cons and our lower end $1.12. Rev, EBIT and EPS grew 4% (adjusted for fuel and change in large SCS contract accounting), 8% and 14% vs 1%, 4% and 15% during 1Q:08. The qtr. was muddled with a $1.10 headline report and many puts and takes, but quite strong any way you slice it on an operating basis.

CNW reported continuing EPS that was 9% above Cons. Rev, EBIT and EPS grew by +25%, +11% and -5% (reflecting strong Rev. but still pro-forma comps and likely dilutive impacts of CFI acquisition) accelerated from +20%, +1% and -17% y/y change in 1Q. The quality of the qtr was $0.03 better as a result of a higher than expected tax rate.

KNX reported $0.15 EPS compared to Cons and our $0.16 and $0.17 expectations. Rev, EBIT and EPS changed y/y by +14% (+1% net of fuel), -29% and -29% compared to +6% (-2.5% net of fuel), -31% and -31% y/y during 1Q:08.

ABFS's stock plunged 20% Wednesday after it reported 2Q:08 EPS 15% below Cons. Rev, EBIT and EPS changed y/y +9%, -15%, and -18%, decelerated from 5%, 58% and 67% growth off an easier comp in the seasonally slow 1Q. The quality of ABFS' qtr was somewhat better on an operating basis as Other income, tax rate and share count provided about a $0.03 drag relative to our above Cons estimate.

CHRW missed Cons EPS expectations by 5%. Net Rev., EBIT And EPS growth of 10%, 11% and 10% decelerated from y/y growth of 14%, 18% and 19% during 1Q. The miss relative to our expectations was mostly related to lower Net Rev. growth of 10% vs. our 14% expectation driven by compressed gross yields, despite better than expected 24% gross rev. growth (up from 23% in 1Q).

NSC posted $1.18/shr, well above our high-end $1.09 and Cons. of $1.06. Despite a 2% decline in vols, Rev., EBIT and EPS grew by 16%, 16% and 21%, each materially accelerated from 11%, 12% and 10% y/y growth in 1Q.

Rev, EBIT and EPS changed +7%, -18% and -18% y/y during 2Q deteriorated from +6%, -9% and -9% in 1Q. Generally core Domestic Package (+$0.03 EPS) and Supply Chain (forwarding, logistics, LTL) (almost +$0.02 EPS) were better than expected and Int'l Package (-$0.04 EPS) worse.

CP reported 2Q EPS of C$0.97, below our recently reduced C$1.03 and Cons. of C$1.04. Arguably the qtr. was about C$0.03 weaker as CP benefited from a lower than expected tax rate. As reported, Rev., EBIT and EPS were +0%, -18% and -13%, well below our expectations of +5%, -12% and -8%. This also compares with +3%, -14% and -12% reported last qtr.

HTLD reported $0.16 con't EPS vs Cons $0.16 and our $0.15. GAAP EPS was $0.18 as HTLD benefited by $0.02 from a lower tax rate due to implementation of FIN 48. Y/y Rev, EBIT, and EPS changed by +10%, -26%, and -21% improved vs +4%, -37%, and -34% in 1Q. Relative to our lower end expectation, HTLD reported slightly higher rev. and a better OR, despite no gains on sales of equipment in the qtr (vs. $4.1M pretax or $0.04 a year ago).

CNI reported 2Q EPS of C$0.90, a penny above our estimate and recently lowered Cons. Still, the report was materially weaker than we expected with worse rev. growth and margins offset by lower incentive comp, a lower tax rate and other income gains. Arguably the qtr. was closer to C$0.81. As reported, Rev., EBIT and EPS changed by +4%, -13% and -5% vs. +1%, -7% and -2% during 1Q.

FWRD reported 2Q:08 EPS of $0.42, vs. our $0.42 and Cons $0.41. Rev, EBIT, and EPS, aided by the Pinch acquisition, grew 31%, 11% and 9% y/y during 2Q, accelerated from 24%, 5%, and 3% in 1Q:08. Relative to our expectation, the Qtr was about $0.015 better at the EBIT Line, offset by worse Other Income Expense, tax rate and share count. Mgmt provided 3Q:08 guidance of $0.40-$0.44 vs our unchanged $0.40 and prior Cons. $0.43.

Negotiations between the PMA and ILWU continue to progress after their contract expired on June 30th. However, dockworkers at L.A. and L.B. have begun staging unit breaks (rather than staggered ones), which has reduced worker productivity by an estimated 10%-30%.

This weekly report summarizes the most recent views and research of Wolfe Research. Included are (1) three to five snippets or key takeaways from our team's recent channel checks with traffic managers about their experiences with purchasing, competition, and service from Airfreight and Logistics, Rail, and Truck capacity providers; (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 and logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.

Total Week 28 vols decreased 0.1% y/y, slightly worse than last week's +0.7% but still better than -3.4% 2 weeks ago. This is also improved from -2.4% in 2Q. Our sense is that the recent improvement has been driven by easing comps, continued strong export/commodity demand and likely some make-up vols following the Midwest floods. This week also benefited from an unexpected and likely temporary increase in auto vols.

WERN reported $0.25 EPS vs. our and Cons. $0.21. Rev, EBIT and EPS changed y/y by +9%, -20% and -15% improved from +2%, -51% and -43% y/y in 1Q:08. Operating performance beat even better than EPS, as higher tax rate and share count provided a $0.01 combined drag.

LSTR reported $0.56 EPS in-line with us and Cons. and vs. prior guidance range of $0.51 to $0.57. Rev, EBIT and EPS grew y/y by 10%, 1% and 6% accelerated from 6%, -1% and 3% in 1Q. Generally, rev. was better and costs higher than expected. LSTR suffered $0.03 impact y/y from increased incentive comp accruals, which we don't consider unusual and will continue into 3Q.

CSX reported 2Q EPS of $0.89, in line with our estimate and a penny below Cons. Still, the report was better than we expected with stronger rev. growth and margins offset by higher interest expense and a higher tax rate. Rev., EBIT and EPS grew 15%, 17% and 25% vs. 12%, 34% and 61% during 1Q.

ODFL pre-reported 2Q EPS in a range of $0.62-$0.64 (about 11% y/y growth) vs. our prior $0.54 and Cons. $0.50. Mgmt cited 10.2% tonnage growth (vs. our expectation for 8% and 6.6% growth in 1Q), as well as a more stable pricing environment and improved productivity.

JBHT reported a clean $0.39 EPS vs our $0.38 and Cons $0.36. Rev, EBIT, and EPS changed +14.2%, -2.3%, and +4.5% y/y. The upside relative to our expectation resulted from modestly better than expected EBIT across all operating divs and lower interest exp, offset partially by a higher share count.

TNT's stock was up 26% after the Financial Times reported that FDX and TNT were in "preliminary talks". It is not clear whether that is for TNT's Express unit or its entire business including Mail. TNT has danced with FDX and UPS before, with the issue in the past always bogged down over price. We believe that TNT's Express unit is a more natural fit for FDX than UPS, although UPS has superior balance sheet flexibility should it want to get involved.

Including recent pre-reports from UNP and BNI, we are lowering our 2Q:08 EPS estimates for all 6 large-cap rails and small-cap GWR by an average of 8%. Our reduced estimates reflect spiking fuel costs, continued weak vols and the impact of the Midwest floods in June. Among the rails yet to report, we see the most downside for CSX and the Canadians and the most upside for KSU and PACR.

This weekly report summarizes the most recent views and research of Wolfe Research. Included are (1) three to five snippets or key takeaways from our team's recent channel checks with traffic managers about their experiences with purchasing, competition, and service from Airfreight and Logistics, Rail, and Truck capacity providers; (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 and logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.

Over the past month there is increased evidence of TL capacity tightening into improving demand driven likely in part by gov't stimulus checks and strong exports, as well as tightening supply as truck builds remain muted and truck closures gradually elevate (although remain stubbornly firmer than past cycles). In 2Q, LTL (and to a lesser extent TL) has likely benefitted from more days in the qtr related to Easter, domestic stocking related to gov't stimulus checks and modestly improved manufacturing (ISM) driven by exports. We don't expect those trends to continue.

Total week 27 rail vols were up 0.7% y/y, improved from -3.4% and -6.9% in the prior 2 weeks. While there were likely some make-up vols following the Midwest floods in June, it is difficult to read much into this week's strong report given volatility around the July 4th holiday (which took place in Week 27 this year and last).

We hosted a conference call Monday with two lawyers and three shippers following the STB's rulings last week against CSX in three rate cases filed by DuPont. These were the first cases tested by the STB under its new guidelines for small rate cases.

After the market closed on Monday, CVTI announced $200M of secured financing through Daimler Truck at 6%, of which $122M was withdrawn to pay down its revolving credit facility and to provide collateral for outstanding letters of credit. CVTI plans to use the remaining $78M for equipment capex.

Our Airfreight and Logistics, Rail and Truck Indexes have pulled back 15%, 14%, and 11% on average over the past month (compared to the S&P 500 down 10% during this period). Still, our 31 transport stocks under coverage are up 8% YTD on average compared to the S&P 500 down 14%.

This weekly report summarizes the most recent views and research of Wolfe Research. Included are (1) three to five snippets or key takeaways from our team's recent channel checks with traffic managers about their experiences with purchasing, competition, and service from Airfreight and Logistics, Rail, and Truck capacity providers; (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 and logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.

Total Week 26 vols declined 3.4% y/y, relatively improved from -6.9% and -6.0% in the prior 2 weeks. On top of an easier comp, rail vols have begun to rebound from the severe Midwest floods as all of the rails other than BNI reported relatively better y/y vols than last week. Rail vols finished the qtr. down 2.4%, deteriorated from -1.7% in 1Q and -2.3% in C07.

The PMA and ILWU were unable to complete negotiations by the July 1 contract expiration. However, unlike 2002 when tensions between the two parties led to a lockout, the tenor of these talks has been much less combative and we expect the parties to continue to work towards a settlement over the next few weeks, although we have heard dockworkers may participate in work slowdowns in the near term.

We recently visited EXPD mgmt at their HQ in Seattle and met with CEO Peter Rose, and President, COO and still