J.P. 摩根-美股-交通运输与物流行业-交通运输与物流业：秋季财报季会议与管理会议问题册-2019.11.5-36页.pdf

North America Equity Research06 November 2019Correction(first published 04 November 2019)(See page 33 for details)Transportation&LogisticsQuestion Book for the Fall Conference Season and Management MeetingsAirfreight and SurfaceTransportationBrian P.Ossenbeck,CFA AC(1-212)622-Bloomberg JPMA OSSENBECK J.P.Morgan Securities LLCSee page 33 for analyst certification and important disclosures.J.P.Morgan does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor inmaking their investment We have compiled questions for management teams ahead of the fall conference circuit which begins shortly after 3Q19 earnings ends and stretches into early December.Management commentary on 2020 will remain limited over the next month,which is consistent with prior years and should be expected given the shifting economic,trade and political outlook.KSU could provide a new 2021 OR target but the company is more likely to update long term guidance with 4Q19 earnings in early 2020.Included in the document are specific questions for companies categorized by topic as well as broad themes relevant for an entire group within transports;see page two for a list of companies covered in this note.2North America Equity Research06 November 2019Brian P.Ossenbeck,CFA(1-212)622- Table of ContentsParcel Carriers.3FedEx(FDX,$140,N).5United Parcel Service(UPS,$134,N).7Railroads.9Canadian National(CNR CN,C$123,N).11Canadian Pacific(CP,C$346,OW).12CSX(CSX,$78,N).13Kansas City Southern(KSU,$152,N).14Norfolk Southern(NSC,$225,OW).15Union Pacific(UNP,$184,N).16Truckload Carriers&Brokers.17C.H.Robinson(CHRW,$79,N).18Echo Global(ECHO,$26,N).19Schneider National(SNDR,$24,N).20Werner Enterprises(WERN,$37,UW).21Knight-Swift Transportation(KNX,$40,N).22Heartland Express(HTLD,$20,UW).23U.S.Xpress(USX,$6.50,OW).24Intermodal.25J.B.Hunt(JBHT,$125,N).27Hub Group(HUBG,$60,OW).29Logistics&LTL.30XPO Logistics(XPO,$90,OW).31Ryder(R,$49,UW).323North America Equity Research06 November 2019Brian P.Ossenbeck,CFA(1-212)622- Parcel CarriersKey questions and themes for the groupNew entrants into final mile delivery have included airlines such as Delta and Lufthansa,should the industry take these recent initiatives seriously?What do regional carriers currently lack to become more of a threat in taking share as packages become lighter and travel shorter distances?If inventories arestaged closer to consumers,will this level the playing field for regional carriers?Is the recently passed AB5 legislation expected to have a material impact on the broader“gig economy”of drivers making final mile deliveries in California?Amazon and others are moving to ship smaller items for free which were previously required to meet certain order size thresholds,how will this move ultimately impact private carrier volume,average weights,and pricing?Could large cities begin to impose congestion fees for parcel delivery carriers?Have office or apartment buildings begun to limit the amount of packages which can be received and stored on site?How can residential stop density materially improve in the U.S.without assumingconsumers pick up packages at retail locations or other access points at a faster rate than overall residential B2C volume growth?Aside from the compressed period between Thanksgiving and Christmas,are there any significant differences with the upcoming peak season and last year?Are retailers offering more“hard dollar”incentives for consumers to pick up in store or take a slower,less expensive home delivery?Will residential B2C packages ultimately be charged a delivery fee in the U.S.?How are strategic partners compensated for joining an access point network?Is it primarily more foot traffic in stores or do they also receive shipping discounts?Competitive product rates for the U.S.Postal service in 2020 will increase but at a much slower rate than 2019,what are the implications for private carriers?Is the industry mantra for the USPS still“no relief without reform?How will the long-term financial viability of the USPS be addressed after the 2020 election?Could market dominant rate reform help kick the can down the road?Could a new Postmaster General and larger Board of Governors have strategicimplications for the USPS?Has SMB competition increased to maintain share?What is a realistic impact of the recent agreement at the Universal Postal Union for the U.S.and others to gradually increase terminal dues on packages lighter than two kilograms?How will this help U.S.retailers and manufacturers?What are the near term and long term strategies for expanding B2B e-commerce?Is it more effective to build,buy,or partner to increase exposure in this area?Why has the final mile delivery of heavy home goods not been a focal point or growth area for the integrators?What are the key challenges and impediments?Are flat operating margins the new up for U.S.package operations?Or can sorting efficiency gains and delivery density improve profitability?4North America Equity Research06 November 2019Brian P.Ossenbeck,CFA(1-212)622- Why has Amazon Day failed to gain traction with an offer for customers to choose one shipment appointment during the week at their convenience?How do parcel carriers navigate rising expectations for faster delivery speeds and free shipping while retailers attempt to meet this increasingly high bar?Is the outlook for reverse logistics positive based on the growth in returns across multiple industry verticals?Does this extend peak season and associated activityprovide some balance in pickup and delivery?One day delivery was a major and costly initiative of Amazon in 2019,what are the short and long term implications of the move assuming P1D sets the new bar?How is the industry gearing up for one day delivery at scale?Is the recent spike in next day air volume sustainable or will inventory staging closer to consumers gradually shift the volume back to ground networks?What could be the next logical step for Amazon after building out an air hub in 2021?Would adding a pick up network improve scale and reduce costs?Or would it be difficult to build density with only Amazon shippers?Could grocery deliveries help build scale and improve residential stop density?Has this service been piloted or tested in the past?A significant amount of access points were announced recently,are they becoming easier to use while moving closer to the majority of the population?Utilizing drones for delivery of specialized packages in constrained environments has increased recently,how far along is the technology from residential applications at a larger scale with greater operating complexity?Autonomous trucks are being increasingly utilized for limited line haul applications,can this technology deliver a 20-30%reduction in purchased transportation expense?Can the vehicles be utilized in a yard or depot as well?5North America Equity Research06 November 2019Brian P.Ossenbeck,CFA(1-212)622- FedEx(FDX,$140,N)Trade&MacroHas the potential inclusion of FedEx on Chinas unreliable entity list(according to the press)had any appreciable impact on operations or business activity?What is FedExs current exposure to China and the broader Asia Pac region?The impact of contracting European activity and industrial production weighed on the most recent outlook,other than fully integrating TNT what additional steps could be taken to navigate similar headwinds in the future with less of an impact?With some advancement in a Brexit resolution and a limited trade agreement between the U.S.and China,have any green shoots appeared in discussions with customers or started to emerge in shipping activity?FinancialsFY20 guidance declined substantially from the initial outlook,which areas within the update forecast still carry the greatest uncertainty and downside risk?Could the Memphis hub be expanded even further after the recent$450mm addition?Is the Indianapolis hub also under consideration for a large scope?What is the expected payback period for the two hub modernization projects?Did the decision contemplate weaker USPS volume in the Memphis day sort?Will the pension obligation require further cash contributions over the next 2-3 years relative to FY20 if interest rates remain at current levels?Which projects were cut from the FY21 capex which is expected to remain flat vs.FY20?How much could be deferred if conditions deteriorate further?Strategy&OperationsThe company has taken a clear strategic direction with Amazon and identified a large addressable e-commerce market,but will dealing with other large retailers be any less difficult if they are subject to the same high consumer expectations?SMBs are increasingly targeted by the three major carriers as a source of profitable growth,have these similar strategies actually benefitted the SMBs?What specific initiatives does FedEx have to expand B2B e-commerce?Potential tech advancements have been on the horizon for several quarters,when should they contribute to financial results?Will they more than offset inflation?Is it possible that Amazons combined marketplace could be responsible for delivering more packages than FedEx at one point in the future?U.S.markets garner almost all of the attention but will international exposure be more important to the long term growth prospects of the organization?It does not appear the Express and Ground networks can be combined,under what conditions could a split network outperform an integrated one?How will the company become the low cost,high service e-commerce carrier?Is this a goal it can achieve independently or will USPS rates need to rise?What strategic advantages and financial benefits come with the low cost crown?Would FedEx essentially replace the USPS in this scenario?6North America Equity Research06 November 2019Brian P.Ossenbeck,CFA(1-212)622- ExpressHow quickly will air network operations flex up or down with market conditions?Is there scope to accelerate the retirement of additional aircraft in the fleet?Has Extra Hours gained traction with shippers since inception?How many are situated to take advantage of later fulfillment direct from a store/warehouse?What type of packages are the 700 flexible rural and residential drivers delivering and under what service conditions?Are they paid similar to gig employees”?If volumes through the USPS day sort network continue deteriorating,what are the implications for utilization of the Memphis day sort?How much of a tailwind did the net impact of fuel have in FY19 and early FY20?TNTIntegration costs have long been excluded from financial results,but how much of a financial drag is operating two European networks as growth falters?Could successful interoperability at the end of FY20 provide a catalyst for the European network and TNT?Or is the main event still the 2021 integration?GroundWas it a conscious decision to add a best service distinction to the goal of becoming the low cost e-commerce carrier?Or was this merely semantics?What caused the greater than expected flow-through of the lost Amazon business on margins?Did the e-tailer re-allocate volume faster than anticipated?The extended Ground offering appears more robust than UPS in that it offers a wider range of services on the weekend,are shippers noticing the difference?How much extra capacity is available for both peak and non-peak volumes?Has the diversion of SmartPost back from the USPS operated as expected?Will the initiative be ready for a wide-spread roll-out after peak season?Are any retrofitted SmartPost buildings expected to handle heavy packages this peak?FreightHas the Freight Direct final mile service been rolled out beyond the initial test markets?What is the expected mix of outside and FedEx equipment and labor?Can Freight grow revenue in FY20 despite a challenging volume outlook and soft truckload rate market?Disruption&TechnologyHow close to commercial applicability is the automated loading and unloading of trailers?What are the technical hurdles remaining for broader utilization?Drone delivery has made several headlines this quarter,is FedEx disadvantaged compared to UPS which operates the only drone airline with a FAA license?What are the most significant changes FedEx will need to make in order to benefit from faster shipping which is still expected to be free?Is the FedEx Bot(Roxo)currently utilized in revenue generating service?7North America Equity Research06 November 2019Brian P.Ossenbeck,CFA(1-212)622- United Parcel Service(UPS,$134,N)Trade&MacroHave the persistent trade tensions between the U.S.and China,combined with weaker European growth and Brexit caused a noticeable shift in supply chains?Is IMO 2020 expected to have any impact on trade flows or freight modes?Have Forwarding customers provided any indication of the potential range of outcomes,similar to the last IMO regulation(SOLAS)?FinancialsWould the company consider investing at a stable level over time instead of the more episodic pattern of large increases for a multi-year period?The benefit from changing asset life assumptions has declined sequentially throughout 2019,will the full year amount come in below prior expectations?Has continued strength in the U.S.dollar on a trade-weighted basis created additional FX volatility in financial results that could carry over into 2020?Does the company have the ability to offset higher pension expenses in a lower interest rate environment by increasing the level of contributions before year end?Have any of the strategic investments and partnerships made several years ago,such as Inxeption and Optoro,contributed meaningfully to financial results?U.S.DomesticWhen adjusting for the impact of extending asset life assumptions and pensions,have unit costs exhibited the same rate of improvement as reported?The pace of base rate increases in Ground have begun to slow on a YoY basis,is the recent level of discipline sustainable into 2020?If next day becomes the standard in B2C and B2B,how much excess capacity does the U.S.air network have with the current fleet and expected deliveries?How is the network positioned to handle an increasing wave of returns?Can retailers follow a similar path as Amazon which is aggregating small packages at a UPS Store and shipping it back in one large box?Will the recent boost to the access point network generate critical mass in terms of geographic coverage with retail partners?What are current utilization rates?When should the initial benefits of the new combination driver class become evident?The company also maintained its right to implement operating technology under the new labor deal,has this been deployed in the field already?The initial scope of seven day delivery scheduled to begin January 1,2020 was limited to utilizing access points and the USPS,when will the service become si