Transports Weekly Chartbook

Research evidence excerpt

Transports Weekly Chartbook

Intro – Rosa’s Reflections for the Week

Strong positive momentum across most of Transports should drive solid 2Q earnings: As we caught up with Transports mgmts. over the past few

weeks, we note some key trends – Rails benefiting from strong volumes but lagging in price; Trucks supported by strong price but lagging in

volumes and having difficulty finding qualified drivers to keep tractors seated; Freight brokers face headwinds from ongoing margin squeeze in 2Q,

with spot rates over +50% the last 5 weeks but solid contract repricing partially offsetting this pressure. FDXF reported as a standalone entity for

its first time last Thursday, with shipments down but higher yield on top of strong fuel surcharges and a supportive pricing environment, which we

see as a positive read for the rest of LTLs on operating margin and EPS results (with XPO and ARCB already signaling OR improvement better than

normal seasonality). Maersk shifted some freight from BNSF to Union Pacific, a good read for UP’s 2H intermodal volumes, even as rails appear to

be winning share from truck. Elsewhere in Transports, potential for stepped-up ELD enforcement could further drive spot rate, AMZN sees some

Truckload volumes shifting back to LTL (another tailwind for LTLs), and the Port of Long Beach had its 3rd busiest May in its history. Broadly

speaking, conditions across Transports appear supportive of solid 2Q results, but we remain mindful of elevated valuations.

Private trucker panel takeaways on improving supply/demand: Last Wed., we hosted a panel on the state of the trucking industry with

executives from two private carriers – Harman Cheema, CEO of Cheema Freightlines (500 trucks out of West Coast), and Ben Schill, Chief Corp.