Wolfe Research's Senior Transportation analyst, Scott Group, hosted a webcast with two large private LTL carriers and one truck broker to discuss upcoming transport reports, including questions like whether tonnage is starting to improve, whether LTL pricing is holding firm, and how net revenue is tranding for brokers in 2Q and July.
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Our WR Transport index increased 0.2% and outperformed the 1.2% decline in the S&P 500. There were 2 big stories in the group last week: the big sell-off in CSX (-10.5% last week) following its 2Q report and the big rally in our TL index which was up 7% last week. This week, we’ll discuss our biggest takeaways from rail reports so far, the TL rally, and preview a busy week of reports ahead. Open the full report for more thoughts on each company reporting this week…
On Friday (7/19/19), KSU reported adjusted 2Q EPS of $1.64, above Cons. of $1.61 and our estimate of $1.63. Similar with most of the rails so far (ex. CSX), KSU beat our model primarily on better than expected yields. Along with the beat, KSU maintained its C19 revenue guidance despite weak volumes, slightly improved its long-term OR guidance, and lowered its long-term CapEx guidance. With the string of positive guidance updates, the stock rallied 5%.
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KSU reported adjusted 2Q EPS of $1.64 vs. Cons. of $1.61 and our estimate of $1.63. Revenue growth beat our model by 140bp, but margins missed us by 60bp, and overall EBIT was basically in line with our model. Adjusted EPS excludes a $0.36 restructuring charge related to PSR initiatives.
HTLD beat Cons. for the 6th straight quarter today and the stock rallied 6%. HTLD reported 2Q EPS of $0.27, above Cons. of $0.24 and in line with our estimate. Revenue declined 9% y/y, but EBIT and EPS increased 31% and 26% y/y. Revenue was 100bp better than our model, while HTLD’s OR improved 620bp y/y to 79.6% and was 70bp better than our model despite lower gains on sales.
UNP reported adjusted 2Q EPS of $2.18 (ex. a $0.04 payroll tax refund) vs. Cons. of $2.14 and our estimate of $2.12. UNP cited a $0.07 drag from weather, and its tax rate was a $0.03 drag to our model, so the underlying quarter was even better. Revenue beat our model by 200bp on better yields, and margins beat by 70bp on lower headcount. Despite weak volumes, UNP reiterated its sub-61% OR guidance for the year. Following yesterday’s pullback, the stock has rallied 5% today (07/18/19).
UNP reported 2Q EPS of $2.22, above Cons. of $2.14 and our estimate of $2.12. The quarter included a $0.04 payroll tax refund, but UNP also noted a $0.07 drag from weather in the quarter.
Yesterday (7/17/2019), IANA reported June domestic intermodal container volume data. Total intermodal volumes declined 9% y/y in June vs. -6% and -4% the prior 2 months.
Today (7/17/2019), KNX and CVTI both pre-reported weaker than expected 2Q EPS with KNX pre-reporting 2Q EPS 6% below Cons. and CVTI 22% below Cons. KNX also lowered its 3Q guidance by 13% (11% below Cons. and down 14% y/y at the midpoint) and provided 4Q guidance 5% below Cons. and down 19% y/y at the midpoint. We’ve cut our full-year C19-20 EPS estimates 6% and 8% for KNX and 23% and 14% for CVTI. There’s nothing company specific here and we expect similar misses for the remaining TLs including WERN, SNDR and HTLD.
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