Mr. Col: I cover primarily truck-based freight companies, truckload carriers, LTL carriers, a couple of special situations and an equipment provider. But I cover primarily the big for-hire truckload and less-than-truckload carriers, companies like Swift Transportation (SWFT), J.B. Hunt (JBHT), USF Corp. (USFC), and SCS Transportation (SCST). I actively follow about a dozen companies.
TWST: What do you see going on in the trucking industry at this
time?
Mr. Col: The financials across the publicly traded companies are
a little healthier, and this is driven to a great extent by the
removal of capacity from the industry. The slower economic growth
we've seen in the last couple of years coupled with the high cost
of doing business, whether it's diesel fuel or the new equipment,
the new engines that are costing truckers more, and the very high
insurance premiums over the past couple of years for trucking
companies ' all of these pressures have served to remove a lot of
smaller, ill-prepared carriers from the marketplace. The bigger,
more financially viable companies are taking share and had a
little better supply/demand backdrop for getting rate increases.
The net result is they're all getting their rates increased a
little and are charging more for their service, because there
aren't as many alternative carriers for shippers to choose from.
So it's a little healthier environment, but it's not really
driven by a big resurgent manufacturing environment or industrial
production growth. It's just that supply/demand for trucking
companies has gotten a little better. You had Consolidated
Freightways go out of business on the LTL side a year ago Labor
Day, and anywhere from 12%-15% of truckload capacity has been
removed in the last three years. So the carriers that are
surviving are finding the environment a little better for getting
rate increases, making their bottom lines a little healthier.
Most of the carriers I talk to have foregone fleet growth while
they focus on growing the bottom line, and that's a pretty good
story in the investment marketplace as well. You have more
rationalized top-line growth until you get an adequate return on
assets you already operate. I'm excited about the opportunity
over the next couple of years. I think we're going to continue to
see consolidation, and the big, well-capitalized carriers that I
follow are well-positioned to benefit and take a lot of share.
Obviously all would get a boost if manufacturing improved and GDP
growth stepped up. Of course that would add further to the story.
But I'm seeing a nice return to profitability and some
rationalization by the CEOs that I haven't seen in a while, so
I'm excited.
Tickers included in this excerpt: ABFS, CLDN, CNF, HTLD, JBHT, KNGT, MRTN, ROAD, RUSHA, SCST, SWFT, USFC, VVN, WERN, XPRSA, YELL
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