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.Friday Freight
This weekly report summarizes the most recent views and research of Wolfe Research. Included are (1) three to five snippets or key takeaways from our team’s recent channel checks with traffic managers about their experiences with purchasing, competition, and service from Airfreight and Logistics, Rail, and Truck capacity providers; (2) notices of upcoming industry events; (3) key takeaways from some of our notes from the past week; (4) recent stock performance for our transport universe; (5) updated comparison tables for the airfreight and logistics group, railroads, and trucking; and (6) fuel trends for West Texas Crude Oil, On-highway diesel, Rail diesel, and Jet fuel.
Inside Freight: YRCW’s Amended S-3 Revives Chatter About Liquidity Concerns
With YRCW’s stock down 10% and the rest of the LTLs up 6% on average yesterday, we received a lot of questions from investors such as “What has gotten into the LTLs?” and “What’s the latest news on YRCW?” We suspect the biggest driver pushing up the LTLs and driving down YRCW yesterday was YRCW’s amended S-3 (from its $70M note deal) filed early Thursday morning which included an updated “Liquidity Risks” section. That section noted that if YRCW were not able to further defer repayments of its $155M deferred pension plan contributions and deferred interest and fees related to its bank debt and ABS facility (~$25M/qtr) at the end of 2010, it might face liquidation. As it now stands, each deferral agreement terminates at the end of this year which would trigger repayment at year end. However, both agreements provide an option (one option for the Teamsters’ pension funds and one option for the Bank syndicate) to extend each deferral agreement through 2011. According to management, the pension deferral agreement can be extended with a majority vote of the multi-employer pension funds involved while the interest deferral requires a 2/3 vote of its banks.
GWR 1Q Earnings: Solid Beat – Materially Raising Estimates & Target Price
GWR reported 1Q EPS a solid 15% above Cons. with in-line rev. but strong op. leverage and despite a $0.03/shr y/y headwind from fuel. Rev., EBIT and EPS grew 5%, 15% and +0% (+13% excluding loss of short-line tax credits), each improved from -6%, +1% and +11% last qtr.
SAIA 1Q Earnings: Upside Quarter as Little Margin Improvement Goes a Long Way
SAIA reported 1Q EPS loss -$0.21 vs. our and Cons. -$0.31 estimate and -$0.47 a year ago. Rev. increased 3% y/y vs. -12% in 4Q while EBIT of -$2M was improved from -$4M last qtr. SAIA beat our estimate on both stronger rev. growth and margins including better cost savings initiatives and more stabilized insurance costs.
UACL 1Q Earnings: UACL Shows Surprisingly Little Leverage to Improved Volumes
UACL reported 1Q on-going EPS of $0.06 vs. Cons. of $0.11 and our $0.12 estimate, excluding a $0.07 gain on sale of securities. While earnings were up from $0.04 a year ago, UACL missed our rev. expectations by about 3pp and our margin estimate by 100bp despite upbeat commentary in the market about the pace of demand and pricing improvement in the flatbed market (about 2/3 of UACL’s mix).
Sell In May And Go Away… Yes, We Said It!
We have always been weary of incorporating seasonal patters into our investment process. Frankly, we have studied the most commonly recognized seasonal patterns and have found them to be a coin toss at best (Santa Claus rally, January effect, etc.). In other words, most are circumstantial and not legitimate. There is one that we’ve lent more credence to over the years: Sell in May and Go Away. Aside from its more consistent results in backtests, it is one that is rooted in human behavior. Indeed, the thinking that the stock market tends to be lackluster from May on coincides with the end of tax season and more importantly the beginning of the summer. The latter is the key factor here since money managers are more likely to make big changes in their portfolios in January than they are in June, right before they head out on vacation. So, we are always willing to hear this one out.
DAN 1Q Earnings: Solid Progress but Substantial Risks Remain
DAN’s 1Q EBITDA of $97M ex-Structures was slightly below our $99M est with $12M greater than expected F/X and Other expense. DAN’s $0.10 of EPS, adjusted to reduce elevated D&A from fresh start accounting by $25M and to remove other restructuring costs of $28M, was above our $0.04 est due to a tax benefit, as pretax was in line with our est.
BWA 1Q Earnings: A Turbocharged Quarter
BWA reported ongoing 1Q EPS of $0.65 versus our and Cons. $0.40, excluding $0.02 from Medicare tax law change. Mgmt raised 2010 EPS guidance 52% at the midpt, to $2.20-$2.50 from $1.40-$1.70, and rev growth guidance to 28%-32% from 15%-19% vs our prior 24% est.
On Track, Week 16 Ending April 24: Rail Volumes Remain Up Strong Double Digits
Total Week 16 Rail vols increased 17.2% y/y, similar with +18.5% and +17.6% the prior 2 weeks. Vols are now tracking up 14.9% the past 6 weeks, led by NSC and CP. We note that y/y comps remain extremely easy the next 5 weeks as rail vols bottomed on a y/y basis in Week 21 last year. On a 2-year stacked basis, total vols remained down 8% vs. C08 levels.
RA 1Q Earnings: Better Report On Operating Basis Driven by Strong Yields
RA reported ongoing 4Q EPS of $0.03—excluding $0.07 of non-cash swap termination costs and normalizing to a 39% tax rate—above Cons. $0.02 and our -$0.01 estimate. RA beat our expectations on stronger yield growth. However, EPS fell y/y from +$0.07 a year ago due to a $0.05 headwind from fuel and a $0.04 headwind from the loss of the short-line tax credits.
