Transport Takes "What We Learned This Week: Highlights from a Shipper Su..."

Research evidence excerpt

Transport Takes "What We Learned This Week: Highlights from a Shipper Su..."

metrics to gauge carrier fitness. FMCSA

calculates a national average OOS rate of 23% for vehicle inspections and 7% for driver

inspections. If a carrier's OOS rates are significantly above the national average, brokers

could drop them from their carrier pool even though no safety rating has been assigned.

Figure 1: Carrier Breakout By Safety Rating And CDL Drivers Associated With

Those Carriers

kout By Safety s Associated With Thos

Carrier Brea Rating And CDL Driver e Ca

rriers

Source: Federal Motor Carrier Safety Administration (FMCSA) and UBS Analysis and Estimates

Key Points of Discussion and Names in Focus

The Montgomery decision was a driver of conversations at the end of the week while

SAIA and CSX were in focus for us earlier in the week. Following are some of the key

points of discussion and sentiment on these names.

CHRW: The Montgomery decision was a catalyst for discussions on CHRW. Our

discussions skewed to investors viewing CHRW positively and considering the positive

impact from potential attrition among small brokers and also a tailwind from rising

truckload rates. While rising insurance costs are a headwind and legal risk would also

increase, our conversations indicate investors are overall looking at CHRW from a

positive viewpoint.

KNX: Our conversations on KNX indicate that investors view this as the go to name to

benefit from a tighter truckload market and stronger truckload pricing. We agree. While

it is difficult to quantify the impact to capacity from the Montgomery decision, we

believe investors are viewing it as having a significant additional effect on the truckload

market on top of the already meaningful tightening effect of multiple FMCSA regulatory

initiatives.