Research Library
Below is our research library, listed in reverse chronological order. Please use the search box to look for research on a specific company or topic, or use the Calendar, Archives, or Sector links at left to browse for research from a specific time period or sector. If you are a Wolfe Trahan client and can not access any of the links in our library, please contact to request our PDF decryption plug-in.Wolfe Research's May 28th Transportation Conference Re-cap Call Replay
Ed hosted a conference call re-capping our Wolfe Research Transportation Conference. On the call he gave the top ten takeaways from the conference and then a panel by panel summary of the conference, as well as some comments on his upgrades of LSTR and UACL based upon the trend of tightening flat bed truck capacity noted throughout the conference. Register here to receive replay info and accompanying note.
UACL: Upgrading to Outperform on Firming Flatbed Fundamentals
We have become convinced that flatbed truck pricing is currently improving (unlike dry van truck were rates are still down y-o-y) as a result of both strong demand and tight supply. UACL has by far the highest exposure to flatbed of any public carrier we cover (roughly 62% of estimated total rev for C08). We have also upgraded LSTR to OP today, which is next with about 30% of its rev. generated from flatbed.
LSTR: Upgrading to Outperform: Improving Demand and Pricing for Flatbed
Both carriers and shippers at our conference agreed that flatbed demand and pricing has tightened materially since April. LSTR has seen improved revenue trends the past 2 qtrs. mostly from its brokerage business and we now expect its lagging BCO business to also show both rev. and profitability improvement going forward. Flatbed accounts for an estimated 30% of LSTR's total truck rev. (2nd most of the public providers after UACL which we also upgraded today). We also believe fuel has little net impact to LSTR.
Following Freight: UNP Rate Case, Jevic Closure, Auto Strikes, Short-Line Tax Credits, LSTR, Truck Bankruptcies, Ocean Price Index, Port Volumes
On Monday, the STB ruled in favor of Kansas City Power and Light in its coal rate case against UNP. The Board ruled that total rate relief through 2015 will reach ~$30M or $3M/year back to '06. This was another STB decision against the rails the past few years, and we expect more rate cases could follow. While near-term pricing visibility remains strong, the magnitude of pricing increases for the rails has likely peaked.
Ed Wolfe's May 16th Launch Call Replay: "Tread Carefully: Transport Valuations Feel Stretched into Bipolar Economy and Spiking Fuel Costs"
Receive our initiation slides and listen to the replay of our launch call.
YRCW: Initiating Coverage with an Underperform Rating: Operating and Liquidity Issues Overshadow Potential Operating Leverage
On April 24, YRCW reported a GAAP loss of $0.81, vs. our estimate of a $0.29 loss and Cons. -$0.25. Adding back $0.13 of restructuring charges related to recent regional terminal shutdowns arguably boosted YRCW's 1Q result to -$0.68.
WERN: Initiating Coverage with an Underperform Rating: Strong Downside Leverage Not Reflected in Valuation
WERN is a quality, well-operated TL provider with high-end technology and a disciplined approach within the marketplace. Because WERN values a consistent pricing relationship with its customers, it tends to grow below its public comps when demand is strong, and holds up better during downturns. That was the case in the current downturn, until recently.
UTIW: Initiating Coverage with an Outperform Rating: Much Potential and Limited Downside
UTIW mgmt has embarked on a cost-cutting strategy designed to generate $30-$40M ($0.21-$0.29/shr) in annual savings by F2010. Our sense is that mgmt has 3 qtrs. in which to achieve this target or give up the company reins. We would expect the latter to lead to a sale or a change in direction regarding Contract Logistics. Either way, we see limited downside from current levels.
UPS: Initiating Coverage with an Outperform Rating: 2009 Is the Year, But Time to Buy Is Now!
Cons. estimates have recently declined, and we believe are within 5% of a bottom… but we also would have said this a few months ago. More importantly, C09 estimates have also come in 6% of late and we are now 8% above Cons. (and very comfortably so). We see better earnings visibility in 2009 driven by improved vols into easy comps, continued steady but unspectacular pricing, and a more efficient Teamsters contract effective August 1.
UNP: Initiating Coverage with an Outperform Rating: Best Rail Story, But How Much Is Priced In?
About 25% of UNP's contracts have not been re-priced since 2004, compared to closer to 10% on avg. for its rail peers. These contracts are likely more than 20%-30% below current market rates and should support top-line growth and margin improvement regardless of the economy.
