We spoke with a private 3PL about recent TL pricing and capacity trends. Our contact is currently seeing TL tender acceptance rates of 97%-99%, at YTD highs despite being in peak season. For comparison, our contact’s tender acceptance rates typically fall to 87%-92% in mid-October. Our contact reduced his TL contract rates by 2%-6% this summer, and he’s currently moving spot shipments 5% below his reduced contract rates. Looking ahead, this 3PL is preliminarily budgeting for flat contract pricing in C20. Our contact also conducted an intermodal bid this summer and lowered his rates by 1%-2%. However, he’s moving much less intermodal volume this year since TL is cheaper than intermodal on a bunch of lanes currently. Looking out to next year, he’s expecting his intermodal volumes to increase 1%-2% y/y.
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Yesterday (10/16/19), IANA reported that industry-wide domestic container volumes declined 4% y/y in Sept. vs. -6% and -4% the prior 2 months. In contrast, JBHT’s intermodal volumes increased 3% y/y in Sept. and inflected positive relative to -1% and -2% the prior 2 months. So JBHT’s intermodal volumes outgrew the industry by 700bp last month vs. 500bp in August, 200bp in July and 130bp of underperformance in 2Q. This marks JBHT’s largest share gains since mid-2016 amidst the last freight downturn (see Exhibit 1 in the full note).
After the close (10/15/19), JBHT reported 3Q EPS of $1.40, below our estimate and Cons. of $1.44. Relative to our model, Intermodal and Dedicated both missed our model slightly by less than a penny, TL missed us by a full penny, and ICS (brokerage) missed us by $0.03.
Over the past 2 weeks, we conducted our quarterly lunches in NYC and Boston with ~75 investors. In today’s note, we compiled the survey results from our lunches to gauge 3Q earnings expectations and sentiment broadly on the transports including favorite sub-sectors, top long and short ideas, and transport pricing/volume expectations.
Shippers expect their same-store shipment volumes to increase 1.8% over the next 12 months, the lowest expectation in the past 13 quarters. Meanwhile, shippers continued to cite higher year-over-year inventory levels and inventories above targeted levels. So we don’t expect a big recovery in near-term freight volumes.
Our WR Transport Index rose 2.7% last week, nicely outperforming the 0.6% rise in the S&P 500. The LTLs (+5%), TLs (+3%) and Rails (+3%) were the best performing sub-sectors last week, while the Integrators (+1%) relatively lagged.
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.
Earlier this week, we met with 18 public and private TL and LTL carriers and industry contacts at the ATA’s Annual Truck Conference in San Diego. Generally, the tone was cautious amidst the current freight recession, although some carriers expressed hope that demand trends have bottomed with some slight seasonal improvements in Sept. Meanwhile, early October updates were more mixed.
Our WR Transport Index fell 3.2% last week, badly underperforming the 0.3% drop in the S&P 500. The LTLs (-5%), Rails (-4%) and TLs (-3%) were the worst performers last week, while the Integrators (-1%) held up relatively best. After last week’s move, the Rails are now up just 15% YTD and they’re underperforming the S&P 500 (+18%) for the first time all year. If this continues into year-end, it will mark just the second time in the past 19 years that the Rails have underperformed the S&P 500 for a calendar year.
We spoke with a large food & beverage shipper about TL capacity and pricing trends. Our contact isn’t seeing any signs of the TL market getting any tighter, and in fact, it may still be getting a little bit looser. This shipper’s tender acceptance rates remain right around 99% with his primary carriers rarely rejecting any loads. This shipper completed a TL bid in June and realized average savings of 1%, but he’s now re-bidding around 75% of his lanes as he realized he can achieve even more savings in the current market. He now expects additional savings of 3%-5% starting in January but thinks he could possibly see even bigger savings if he delays his bid into early next year when the market should be even looser seasonally.
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