HOLT Industrials "State of Freight + Framing Risk/Reward for SAIA" Munson

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HOLT Industrials "State of Freight + Framing Risk/Reward for SAIA" Munson

HOLT Industrials UBS Research

Momentum Turning Across Freight Markets

Light at the end of the tunnel in freight markets? Transports are showing signs of

emerging from an unusually prolonged freight recession with available trucking capacity

shrinking as smaller carriers struggle with rising costs and regulatory enforcement. In

typical fashion, the tailwind of tight trucking capacity and rising rates is expected to

extend beyond the road, driving intermodal demand for rails.

Freight equities have rallied, though still lag far behind on a multi-year basis.

Freight stocks have moved up off the trough from last summer. A broad aggregate of Fundamental color on the

North American companies in the Cargo Ground, Rails, and Air Freight & Logistics sub- inflecting momentum

industries rose ~30% over the last 12 months. Notably, despite the rally, the group has

still underperformed the broader Industrial complex materially over a multi-year horizon. UBS Transportation analyst Tom

Specifically, the Freight group is down 4% over the last five years, which compares to Wadewitz commented in a recent

aggregate stock price performance across the broader Industrial sector of +52% in that note, "Based on our conversations it

same span. is clear the truckload (TL) rate cycle

has significant positive momentum

Figure 2: Freight stocks have bounced off the bottom, though remain far behind with the pace of increase in truckload

sector peers contract rates continuing to move

higher." What We Learned This

d o Week: Highlights from a Shipper

nce Summit, Capacity Impact from

bou Montgomery, & Investor Sentiment

ve

Canadian Pacific Kansas City LTD

ha (CP) CFO Nadeem Velani noted on

cks a recent call, "I'm not going to say