Truckload carriage seems to get more attention on Wall Street, but less-than-truckload deserves a second look, according to Jeffrey Kauffman, first vice president, Merrill Lynch & Co.
“We have seen a very rapid expansion in the regional LTL segment,” Kauffman recently
said during a roundtable discussion for The Wall Street Transcript. “American Freightways has expanded very aggressively into a lot of new territories. And both CNF and US Freightways are in the process of filling a density of some of the younger regions. Both are operating fairly well across-the-board in almost every geographic region in the country.”
LTL is the trucking sector that tends to be neglected by analysts, “but there’s so much
low-hanging fruit for these carriers, and the focus of managements really have changed,” he said. Arkansas Best, he added, reported 86% earnings growth last year. Roadway earnings were up 82%, and Yellow’s grew 34%.
In the truckload sector, Kauffman likes Werner Enterprises and Swift Transportation.
Werner, he noted, was debt-free until about a year and a half ago when it decided to
leverage itself to improve returns and supercharge growth. “The good news is, it worked,” he said. “The bad news is that there was a turn in the market and they more or less had to scrap that strategy until the market improved.”
Kauffman describes the truck leasing and rental segment as “relatively benign.” With truckload carriers invading their turf in the dedicated and leasing arenas, truck leasing companies are looking to expand in other areas, he said.
The 14,500 word transcript of the roundtable discussion, which also features Deutsche Banc Alex.Brown equity analyst Paul Jeanne, is available from The Wall Street Transcript or by calling (212) 952-7433.
While the number of spot market loads on the DAT network of load boards fell last week along with truck posts, rates changed little.