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We’re updating our rail models halfway through 2Q. Volumes in 2Q are tracking below our expectations for all of the rails but CP, although we expect offsets from better than expected mix, improving service metrics, and improving labor productivity. As a result, our 2Q estimates are now modestly above Cons. for CP, CSX, and NSC, but modestly below Cons. for CNI, UNP, and KSU.
The who’s who of transportation will gather this week at the Marriott East Side for our 12th Annual Transport Conference in NYC. We’ve got over 50 transports and airlines presenting and/or hosting 1x1 meetings.
This week, we’ll discuss key themes we expect to focus on at the conference: are 2Q estimates safe for the Rails, are there signs of life for truckers and intermodal in May, and what’s the pricing outlook for TL, LTL and Intermodal? And why can’t FDX and UPS start to replicate some of the labor productivity we’re seeing from the rails? Open the full report for more details…
Pasted below, please find our Friday Freight note. We distribute this product via email each Friday mid-day, so clients have some freight reading material to make their weekends truly worthwhile! Your feedback is always appreciated if you have any suggestions.
We’ve updated our annual transport valuation “black box” based on quantitative rankings of risk, reward and returns. Below, we compare all of our transport companies relative to each other and the S&P 500 based on 6 historical and projected metrics including: revenue 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). We believe companies atop our black box rankings should trade at higher valuations through a cycle than those at the bottom.
The STB released April headcount data for the rails (U.S. operations only) earlier today. Total headcount declined 1.2% y/y, the largest decline in 11 months. Total headcount also fell 0.5% m/m, the 5th straight sequential reduction. As a result, labor productivity inflected back slightly positive with headcount down 1% y/y in April vs. volumes down around 0.5% y/y.
Over the past week, we surveyed investors to measure sentiment on the transports including favorite sub-sectors, top long and short ideas, and transport pricing/volume expectations. Click here for the full note with all of the results, and thanks for filling out our survey, if you did.
Given this week’s tariff news, we’ve updated our table with estimated China exposure for each of the rails. As shown in Exhibit 1, we estimate the most China exposure for UNP at around 12% of total revenue, driven mostly by intermodal imports and grain exports. On the other hand, we estimate the least China exposure for KSU.
Our 12th Annual Global Transport Conference takes place on 5/21-22 in NYC, and we have over 50 Transport, Airline, and Cruise companies scheduled to present and/or host 1x1 meetings. This report includes a list of 10 questions to ask each company at our conference (and others) as well as key themes we expect to explore.
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