This 120-page report lays out our bullish long-term thesis on the domestic intermodal sector as well as the best ways to invest in secular intermodal growth opportunities. Within the report we provides a deep dive analysis on the intermodal market, including a detailed overview of the market, key players and market share stats. We also discuss the differences between the international and domestic intermodal markets, review each rail’s exposure to intermodal and discuss why intermodal is much more profitable for the rails today versus 20 years ago. We also provide a detailed analysis of the underlying secular demand drivers for domestic intermodal volumes and try to quantify how quickly the market can grow over the next five to ten years and what this could mean for earnings with a similar discussion on international intermodal drivers. We conclude with profiles on the three largest domestic intermodal providers, JBHT , HUBG and PACR (each rated Outperform).
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.
UACL beat 3Q Consensus expectations by 35%, missed 4Q estimates by 23% and has now beat 1Q estimates by 10%. Thus, its operating and financial performance remains very inconsistent and EPS visibility remains low in our opinion. Our sense from UACL management is that 2Q:12 is off to a sluggish start and that volume weakness which began in late March has persisted into April in its Truckload segment but that brokerage remains strong as does pricing overall.
UACL reported 4Q EPS of $0.23, 23% below Cons. and 30% below our expectations. Rev., EBIT and EPS grew 12%, 17% and 13% y/y, but each decelerated materially from very strong 3Q results. Relative to our high-end expectations, rev. growth missed by 9pp while margins missed by 70bp. A high tax rate also reduced EPS by $0.02 vs. our forecast.
We believe valuation should be based on a combination of an underlying company’s risk, reward and returns. Our note today compares each of our transport companies relative to each other and the S&P 500 based on 6 historical and projected metrics including: Rev. and EPS growth (i.e. reward), free cash flow and return on capital (i.e. returns), and balance sheet leverage and earnings cyclicality (i.e. risk).
UACL reported 3Q EPS of $0.35, 35% above Cons. and 46% above our expectations. Rev., EBIT and EPS grew 20%, 81% and 90% y/y, each materially accelerated from 2Q. UACL beat our expectations across the board, with better rev. in all 3 segments and 110bp of better margin improvement. We spoke with UACL yesterday afternoon, and mgmt was upbeat as strong trends in 3Q have continued into Oct.
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.
UACL reported 2Q EPS $0.01 above Cons. but more in line adjusting for a lower tax rate in the qtr. Rev., EBIT and EPS grew 17%, 50% and 63% y/y vs. +13%, +160% and +150% during 1Q. Relative to our expectations, gross rev. was in line but UACL’s OR was 20bp worse due to higher than expected purchased transportation costs.
We expect mostly in-line Airfreight & Logistics reports, driven by decelerating freight demand and tougher comps, offset for most by strong pricing or gross yields. Among our coverage, we see the most potential upside for UACL followed by UPS.
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.