This month’s Macro examines March and April data. As shown on Slide 8, freight vols on avg. declined 2% y/y in March and are tracking up less than 1% y/y based on preliminary April data after growing close to 3% the 1st two months of the year. Moreover, our proprietary Seasonal Freight Index (Slide 7) has dipped back below 50 the past 2 months after accelerating sharply late last year and early this year.
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.
UPS and the Teamsters announced a tentative 5-yr labor contract. The tentative deal comes approx. 3 months before the 7/31 expiration date for the current deal. We expect more info about the deal to creep out as Teamster members are educated to vote on the deal over the next 2 months.
UPS reported $0.03 above Cons. with Rev., EBIT and EPS growth of 2%, 3% and 4% y/y. Trends were similar to 4Q with continued strong vols, weak yields and mixed margins. UPS also announced a tentative labor contract with the Teamsters (see our separate note on the deal).
UPS reported adjusted 1Q EPS of $1.04 vs. Cons. of $1.01 and our $1.02 est. This excludes a net $0.04 gain related to the failed TNTE acquisition. UPS also announced the acquisition of Hungarian healthcare logistics company CEMELOG, although financial terms were not provided.
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.
The USPS announced that it plans to stop delivering First Class mail on Saturdays beginning August 5, which it estimates will drive $2B of annual cost savings. The Post Office believes they can independently move ahead with a 5-day Mail delivery schedule without Congressional approval, although it seems likely that Congress and/or unions could try to block or at least delay the move. The USPS competes directly with FDX and UPS through its Priority and Express Mail product offerings. They are the low-price provider in the parcel industry, and if financial struggles at the USPS cause any service reductions in these products or cause the USPS to exit the parcel industry over time, it should allow FDX and UPS to take share and raise rates.
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.
UPS reported $0.06 below Cons. and $0.07 below its prior guidance, as Hurricane Sandy was a $0.05 drag and higher than expected legal costs associated with the TNTE deal cost another $0.01. While cash flow remains tremendous and wining a piece of the USPS Priority Mail contract from FDX is a potential near-term catalyst, cost headwinds will limit EPS growth again this year, and we sense UPS is a couple of qtrs. behind FDX in trying to offset Int’l mix headwinds. We also see risk of slower domestic vols in the near term if UPS doesn’t announce a new Teamsters contract over the next 2-3 months.
UPS reported 4Q EPS of $1.32 vs. Cons. of $1.38 and our $1.39 est. This compares with UPS’s prior guidance of $1.39 at the midpoint provided before Hurricane Sandy which UPS estimates was a $0.05 drag in the qtr. Excluding the impact of Hurricane Sandy, UPS only slightly missed expectations, but Int’l Package margins were much worse than our expectations despite improved vols (we don’t know how much of the Sandy impact, if any, is in Int’l). We need to better understand continued weak Int’l margins and what this also means for FDX. UPS’s C13 guidance was also light and doesn’t imply much EPS growth after assuming about 5% share buybacks.