We expect TNT to report ‚¬0.39 when they release on February 21, about 15% below what we believe is current ‚¬0.46 Cons. TNT continues to struggle fundamentally with both its Express and Mail business seeing competitive pressures and recent European snow storms, Mail strikes, and 3 fewer op days in 4Q y/y likely did not help.
Our market weighted Transport stock coverage handily outperformed the S&P 500 (+24% to +13%) during C10, and outperformance was broad-based with 22 of our 33 stocks beating the market. The best performing sub-sectors in C10 were Non-Asset Forwarders (+44%) and the Rails (+32%). The LTLs (-4% or +13% ex. YRCW) were the only group to underperform the market.
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.
TNT’s stock closed up 8% yesterday after its 4-hour Analyst Day and updated blueprint of its announced restructuring. The main focus was on the separation of Mail and Express now scheduled for Jan. 1st, with scheduled Express demerger and stock listing slated for June 2011.
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.
Driven by a solid economic recovery off a weak bottom, continued inventory restocking and increased inventory turns into tighter inventory control, freight has been stronger than the economy in 2010 with Rail, Truck and International Air vols up 12%, 6% and 26% year-to-date.
After materially outperforming the market in 2009, TNT’s stock has been a material laggard down 15% YTD vs. UPS and FDX up 20% and 5%, the Dutch AEX up 2% and the S&P 500 up 7%. TNT has struggled with quickly declining Mail vols and recently with weakening Express Yields and worse than expected operating margins into a weakened European econ. backdrop.
Yesterday morning, TNT reported continuing EPS 20% below Cons. Both Rev. and margins were disappointing as were both Mail and Express EBIT and trends relative to our expectations. A continued weak pricing env’t did not help Express and extra pension costs dragged Mail, and it seems that Mgmt’s operating focus may be distracted by the impending restructuring.
We expect in-line to upside AF&L reports, driven by strong freight demand but tougher y/y comps and moderating ocean and domestic truck pricing. We look for generally strong reports, more like the Rails than the Truck sub-sector, for AF&L providers.
TNT reported ongoing 2Q EPS of ‚¬0.33, below Cons. of ‚¬0.39 and our higher-end ‚¬0.42 estimate. TNT took a step back in 2Q as y/y Rev., EBIT and EPS trends decelerated materially relative to 1Q despite similar comps. TNT missed our higher-end Express and Mail EBIT expectations by ‚¬0.06 and ‚¬0.02, respectively.