UTIW’s Net Rev. and EBIT declined 7% and 83% y/y in F1Q, both a little worse than our expectation but relatively improved from last qtr. UTIW reported its 2nd straight EPS loss and burned $67M of cash in F1Q, materially worse than a $27M cash burn a year ago.
UTIW reported a F1Q:14 (ending April) EPS loss of ($0.04) vs. our break-even est. and Cons. of +$0.03. Note that we have included $0.02 of ongoing severance charges but excluded $0.08 for a one-time valuation allowance on deferred tax assets (related to certain unprofitable operations). The ($0.04) loss compares with a ($0.16) loss in F4Q and +$0.12 in F1Q a year ago.
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.
Tags: AAWW, ABFS, CGI, CHRW, CNI, CNW, CP, CSX, CVTI, EXPD, FDX, FWRD, GWR, HTLD, HUBG, JBHT, KNX, KSU, LSTR, NSC, ODFL, PACR, R, RRTS, SAIA, SWFT, TNTE.AS, UACL, UNP, UPS, UTIW, WAB, WERN, YRCW
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.
UTIW’s stock fell only 2% despite reporting its 1st operating loss in nearly 15 years and materially missing Cons. expectations of +$0.14/shr. Gross rev. remained negative y/y for the 4th straight qtr. and slightly missed our expectations, while gross yields were much worse and cost headwinds much higher than we expected.
So far, 25 of our 34 freight transport companies have reported earnings and we’ve had 11 beats, 6 misses, and 8 in-line reports in 4Q following mostly downside reports in 3Q. SWFT had the only stand-out report in our opinion, but transport stocks overall have performed well out of 4Q with our avg. stock up 4% since reporting and up 10% YTD. We continue to see a favorable backdrop for transport stocks based on our expectation for both vols and pricing to accelerate throughout the year. Our favorite stocks remain CP, FDX, CHRW, JBHT, SWFT and RRTS.
Tags: AAWW, CGI, CNI, CP, CSX, GWR, JBHT, KNX, RRTS, SFWT, UNP, UTIW
UTIW missed Cons. expectations by 36%, even before large severance charges in the qtr. Particularly, UTIW badly missed expectations on weaker than expected gross rev., accelerating cost headwinds, and another large FX headwind. With continued weak forwarding fundamentals and continued cost headwinds from its transformation efforts, we expect disappointing EPS trends to continue. Applying a 15x forward P/E to our reduced F15 (C14) EPS of $0.90 implies a reduced target price of $13.
UTIW’s F3Q report was much weaker than we expected and we expect the stock to open under material pressure today. We have a downward bias to our EPS estimates which are already 12% below Cons. for next year. While we see both secular and cyclical headwinds challenging all int’l freight forwarders currently, UTIW also continues face company-specific cost headwinds that we expect will continue well into F14.
UTIW reported F2Q EPS of $0.18, including $0.02 of severance charges that management excludes as one-time but we view as ongoing, well below our est. of $0.22 and Cons. of $0.23 and down 18% y/y. Despite UTIW’s weak F2Q report and bearish call, the stock was up 8% yesterday. With continued weak forwarding fundamentals and continued cost headwinds from its transformation efforts, we expect disappointing EPS trends to continue. Applying a 15x-16x forward P/E to our reduced F14 (C13) EPS of $0.83 implies a target price of $13 or 11% downside from current levels.
UTIW will report F2Q (ending July) and FDX will report F1Q (ending August) , and we are reducing EPS estimates for both given continued weak int’l airfreight vols. We also expect negative ocean gross yields and the weaker Rand to pressure UTIW, while higher sequential fuel prices should hurt FDX. We remain on the sidelines for UTIW given weak forwarding fundamentals and company-specific cost headwinds, although it could benefit from a potential East Coast port shutdown at the end of the month. Meanwhile, despite near-term EPS risk for FDX, we reiterate our OP rating and $108 target price given catalysts outside the economy from its pending restructuring and likely market share gains ahead of UPS’s Teamster renegotiation in C13.