巴克莱-美股-交通运输业-北美交通运输业2018年Q4预览-2019.1.16-35页.pdf

Equity Research 16 January 2019 CORE Barclays Capital Inc.and/or one of its affiliates 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 in making their investment decision.PLEASE SEE ANALYST CERTIFICATION(S)AND IMPORTANT DISCLOSURES BEGINNING ON PAGE 29.North America Transportation 4Q18 Preview Another quarter,another dollar.Transport equities have fallen materially over the past three months along with the broader market,but a notable dichotomy has formed as investors seemingly look for railroads to chug along,while expecting meaningful degradation at non-rail transports.Since September,rail equities on average have fallen 9%compared to non-rail transports on average 18%lower(relative to the S&P down 11%).And while we have noted recently(Transport Data Deep Dive published 07 Jan 2019)that global fundamentals have slowed from 2018 highs,especially in Europe and China,domestically in the US demand growth remains robust.However,given strong negative market sentiment,it is hard to see how 4Q18 earnings will act as a catalyst for a material rerating.More likely investors will continue grappling with recent commentary pointing toward negative earnings revisions on slowing global demand(FDX,XPO and now DAL)versus concurrent domestic US data suggestive of continuing cyclical strength.Investors expecting some precision from railroad executives.Fourth quarter rail demand finished with an up-tick in December,supporting a relatively robust volume outlook for around 2.6%growth in 2019.Further,RCAF ex-fuel,an important indicator for pricing,was up 4.9%in 4Q18 and is up 3.6%in 1Q19,pointing to healthy yield expansion entering the year.However,we think questions surrounding North America energy related demand and spending will be critical to sustaining industrial driven momentum in 2019,especially given lower commodity prices.Beyond market fundamentals,we expect investors will focus on how US railroads can potentially emulate the recent efficiency gains at CSX,especially given recent management changes at Union Pacific(see Union Pacific Moving in the Right Direction published 08 Jan 19)and the upcoming Norfolk Southern analyst meeting in February.When will trucking stocks work?Even though trucking fundamentals have largely stayed constructive through 2018,equity performance has meaningfully lagged both transport peers and the S&P 500.Concerns around elevated class 8 truck orders and contracting spot freight rates have pressured the group.We view recent data as evidence of a more normalized freight environment after severe disruptions in the fall of 2017 and early 2018,with spot rates now near prior relative outcomes to contract rates.And with supply and demand economics still suggestive of a favorable market for truckers,we remain positive on KNX shares.Slowing China trade could impact Expeditors;C.H.Robinson could benefit from lower spot rates and XPO needs to deliver on cash flow.Expeditors could face some top line challenges in 2019,given a slower global trade environment,especially if higher US tariffs are implemented.For XPO,we expect management to discuss some incremental softness in Europe,but reiterate a focus on improving efficiencies and expanding the business in high growth verticals.Please continue to page 3 EARNINGS PREVIEW North America Transportation POSITIVE Unchanged For a full list of our ratings,price target and earnings changes in this report,please see table on page 2.North America Transportation Brandon R.Oglenski+1 212 526 8903 BCI,US David Zazula,CFA+1 212 526 5108 BCI,US Matthew Preston+1 212 526 5752 BCI,US Matthew Wisniewski,CPA+1 212 526 5143 BCI,US Barclays|North America Transportation 16 January 2019 2 Summary of our Ratings,Price Targets and Earnings Changes in this Report(all changes are shown in bold)Company Rating Price Price Target EPS FY1(E)EPS FY2(E)Old New 15-Jan-19 Old New%Chg Old New%Chg Old New%Chg North America Transportation Pos Pos C.H.Robinson Worldwide Inc.(CHRW)EW EW 85.23 95.00 95.00-4.60 4.61 0 4.85 4.85-Canadian National Railway(CNI)EW EW 81.28 88.00 86.00-2 5.41 5.45 1 6.05 6.05-Canadian National Railway(CNR CT/CNR.TO)EW EW 107.82 115.00 115.00-5.41 5.45 1 6.05 6.05-Canadian Pacific Railway(CP)OW OW 193.75 235.00 229.00-3 14.13 14.17 0 16.00 16.00-Canadian Pacific Railway(CP CT/CP.TO)OW OW 256.94 305.00 305.00-14.13 14.17 0 16.00 16.00-Expeditors Intl.of Washington Inc.(EXPD)OW OW 67.00 78.00 78.00-3.27 3.28 0 3.45 3.45-Heartland Express,Inc.(HTLD)UW UW 19.06 21.00 21.00-0.84 0.83-1 0.95 0.95-Hub Group Inc.(HUBG)UW UW 40.78 48.00 48.00-2.82 2.81 0 3.20 3.20-JB Hunt Transport Services Inc.(JBHT)EW EW 97.08 128.00 128.00-5.41 5.40 0 6.25 6.25-Kansas City Southern(KSU)EW EW 101.35 130.00 130.00-6.01 5.98 0 6.90 6.90-Knight-Swift Transportation Holdings(KNX)OW OW 28.84 52.00 52.00-2.37 2.36 0 2.60 2.60-Norfolk Southern Corp.(NSC)EW EW 162.49 190.00 190.00-9.20 9.19 0 10.10 10.10-Union Pacific Corp.(UNP)OW OW 152.48 180.00 180.00-7.85 7.88 0 8.95 9.00 1 Werner Enterprises Inc.(WERN)EW EW 30.96 39.00 39.00-2.34 2.35 0 2.50 2.50-Source:Barclays Research.Share prices and target prices are shown in the primary listing currency and EPS estimates are shown in the reporting currency.FY1(E):Current fiscal year estimates by Barclays Research.FY2(E):Next fiscal year estimates by Barclays Research.Stock Rating:OW:Overweight;EW:Equal Weight;UW:Underweight;RS:Rating Suspended Industry View:Pos:Positive;Neu:Neutral;Neg:Negative Barclays|North America Transportation 16 January 2019 3 Transport 4Q18 Earnings Preview In this note,we update our transport estimates ahead of 4Q18 earnings.Single page Transport 4Q18 earnings cheat sheet including estimates and key company considerations(Page 4).Barclays Transport estimate revisions table(Page 5).North America railroad volume(Page 6).Industry volume growth accelerated in November and December after three months of weaker outcomes.Run-rate currently indicates around 2.6%volume growth is achievable in 2019.Expeditors net revenue margin graphics(Page 7).Strengthening ocean freight pricing environment could continue to weigh on margin outcomes,while sustained airfreight pricing could be an impediment to further margin expansion.C.H.Robinson net revenue margin graphics(Page 8).Widening gap between DAT contract and spot rates supportive for better margin outcomes at CHRW.Barclays|North America Transportation 16 January 2019 4 Barclays summary transportation 4Q18 estimate revisions and key stock considerations Source:Refinitiv;Barclays Research estimates;Notes/1 stock pricing as of 12/31/17;Barclays estimates are in bold on top;consensus estimates are in parentheses on bottom.Rel.Perf.Rel.Perf.Barclays EPS Barclays EPS(cons.)TkrTkrRtgRtg4Q184Q184Q18E4Q18E2019E2019EKeys for StockKeys for StockCNEW0.6%$1.44$1.44$6.65$6.65($1.46)($6.93)CPOW6.2%$4.21$4.21$17.90$17.90($4.20)($18.28)CSXOW8.9%$0.96$0.96$4.90$4.90($0.99)($4.75)KSUEW-0.3%$1.57$1.57$7.40$7.40($1.55)($7.61)NSCEW12.4%$2.24$2.24$11.45$11.45($2.30)($11.42)UNPOW7.7%$2.09$2.09$10.05$10.05($2.06)($10.09)HTLDUW-0.8%$0.22$0.22$1.10$1.10($0.23)($1.00)KNXOW-17.0%$0.72$0.72$3.00$3.00($0.73)($2.88)WERNEW-13.1%$0.70$0.70$2.65$2.65($0.69)($2.61)HUBGUW-15.6%$0.90$0.90$3.40$3.40($0.91)($3.36)JBHTEW-9.3%$1.49$1.49$6.90$6.90($1.48)($6.23)FTAIOW-6.6%$0.11$0.11$0.33$0.33($0.14)($0.82)CHRWEW9.8%$1.21$1.21$5.10$5.10($1.21)($5.27)EXPDOW-6.6%$0.82$0.82$3.80$3.80($0.84)($3.68)XPOOW6.8%$0.84$0.84$5.20$5.20($0.83)($5.06)Rail,Truckload,Intermodal,Infrastructure&Asset-Light 4Q18 Earnings Preview Rail,Truckload,Intermodal,Infrastructure&Asset-Light 4Q18 Earnings Preview(Industry View:Neutral;OW=Overweight;EW=Equal Weight;UW=Underweight)/1TruckloadTruckloadImproved profitability outcomes at HTLD have come at the expense of revenue,with likely meaningful attrition at acquired IDC business weighing.Investor focus will likely shift to absolute growth with both revenue and EBIT meaningfully below 2014/15 levels.Investor attention likely to continue on margin outcomes at legacy Swift business as KNX management works through contract renewals and improves pricing and profitability.Investors also should look to driver attrition rates.Pricing expectations lower.Lower pricing expectations given softer freight environment through the quarter offset by reduced cost inflation assumptions.For the companys inaugural call,look for commentary around pricing gains,fleet growth and driver wage pressure heading into 2019.With the company hosting an investor day in early February,focus for the quarter will likely be centered on early commentary around expectations for Clean Sheeting initiative and potential opportunity for long term financial improvement.4Q volume inline with est.Volume growth of 3.7%in 4Q ahead of initial 2.2%estimate.Commentary on traction for PSR initiatives likely to drive questions on improved financial outcomes,with hire of Jim Vena as COO and pre-announced margin improvement yoy encouraging.Asset LightAsset LightFurther normalization of domestic trucking contract and spot rates in 4Q should contribute toward margin expansion at CHRW.Look for commentary around demand and trade impacts and early read on 2019.Also topical is recent productivity gains.Sustained pricing strength in airfreight markets could be headwind to margin improvement,while accelerating pricing gains in ocean freight could continue to hurt profitability.We expect heightened attention on volumes given trade actions over the Pacific.Key items:1)revenue and EBITDA growth targets for 2019 given reduction in Dec.around Euro weakness 2)LTL segment outcomes and commentary for further profit improvement 3)increasing competition from JBHT and FDX in final mile service.Infr.Infr.Materially improved outcomes at Jefferson terminal likely to take focus,while outlook for Repauno and Long Ridge are also topical.Aviation FAD likely to remain attractive for the outlook while management attempts to improve cash flow from Infrastructure assets.Int.Int.Expect heightened scrutiny of earnings outcomes as growth diverges between segments.Current guidance for lower truck brokerage and logistics revenue,while anticipating robust growth at both intermodal and dedicated segments(10%).Acq.of Cory trans.to expand final mile services and customer wins creates favorable outlook for dedicated.Intermodal focus likely to be around growth as management focuses on pricing actions and impact from arbitration with BN.Pull forward may benefit.Class I RailroadsClass I RailroadsRTM growth of 12%is impressive,following network service challenges CN faced in early 18.Intermodal,petroleum&chemicals and coal all surprised to the upside.Mix and length of haul could be tailwinds,but we suspect costs for addl capacity could offset.Industry leading volume growth and high single digit RTM expansion suggest demand outcomes remain robust.Given focus on growth,investors will likely look for updates on end market opportunities,inc.intermodal,auto and industrial products.Another quarter of stronger volume growth combined with what we expect to be continued pricing strength will likely leave focus on the companys 60OR by 2020 target given our model est.a 60.4 OR in 2018.Volume growth continues to be challenged with traffic 0.3%lower than 4Q17.Coal has been a notable headwind in 2018,but investors will likely focus closely on volume outlook,political risks around Mexico energy opportunity,and intermodal pricing for 2019.Barclays|North America Transportation 16 January 2019 5 Barclays Transport 4Q18 Estimate Revisions FIGURE 1 Barclays Transportation 4Q18 EPS Estimate Revisions Note:Beginning 3Q18,HUBG forecasts represent estimated impact from divestiture of MODE agency business Source:Refinitiv;Company reports;Barclays Research Transportation EPS Estimate RevisionsTransportation EPS Estimate RevisionsPriorCurrentCons.PriorCurrentCons.PriorCurrentCons.4Q18E2019E2020E2019E2020ECNI$1.41$1.44$1.46$6.05$6.05$6.28$6.65$6.65$6.933%0%0%11%10%CP$4.17$4.21$4.20$16.00$16.00$16.32$17.90$17.90$18.281%0%0%13%12%CSX$0.96$0.96$0.99$4.30$4.30$4.24$4.90$4.90$4.750%0%0%13%14%KSU$1.60$1.57$1.55$6.90$6.90$6.85$7.40$7.40$7.61-2%0%0%15%7%NSC$2.25$2.24$2.30$10.10$10.10$10.28$11.45$11.45$11.420%0%0%10%13%UNP$2.05$2.09$2.06$8.95$9.00$8.96$10.05$10.05$10.092%1%0%14%12%HTLD$0.23$0.22$0.23$0.95$0.95$0.95$1.10$1.10$1.00-3%0%0%14%16%KNX$0.73$0.72$0.73$2.60$2.60$2.66$3.00$3.00$2.88-1%0%0%10%16%WERN$0.69$0.70$0.69$2.50$2.50$2.54$2.65$2.65$2.611%0%0%6%6%HUBG$0.91$0.90$0.91$3.20$3.20$3.20$3.40$3.40$3.36-1%0%0%14%6%JBHT$1.51$1.49$1.48$6.25$6.25$6.23$6.90$6.90$6.89-1%0%0%16%10%CHRW$1.20$1.21$1.21$4.85$4.85$4.98$5.10$5.10$5.271%0%0%5%5%EXPD$0.81$0.82$0.84$3.45$3.45$3.42$3.80$3.80$3.681%0%0%5%10%XPO$0.84$0.84$0.83$4.10$4.10$4.13$5.20$5.20$5.060%0%0%23%27%2020E2020EBarclays RevisionsBarclays RevisionsRailroadsRailroadsEPS GrowthEPS GrowthA-LightA-Light4Q18E4Q18E2019E2019ETLTLIMIMBarclays|North America Transportation 16 January 2019 6 North America Rail Volume Graphics FIGURE 2 North America Industry Volume Growth Accelerated 390bps in Dec.,with All Major Volume Categories Contributing Source:Company reports;Haver;Barclays Research FIGURE 3 Rail Industry Volumes Grew 3.7%in 2018;Rail Volume Run Rate Implies 2.6%Growth in 2019 Source:Company reports;Haver;Barclays Research -2.4%-8.0%0.6%4.5%-3.4%1.6%-0.9%3.1%-1.5%0.0%1.7%2.5%-1.1%-0.6%0.4%5.4%-1.6%-0.5%0.4%3.9%Sep Oct Nov Dec Sep Oct Nov Dec Sep Oct Nov Dec Sep Oct Nov Dec Sep Oct Nov DecRailroad Industry Relative Sequential Volume ChangesRailroad Industry Relative Sequential Volume Changes(2018 avg.monthly seq.change relative to historical average/1)CoalCoalAgricultureAgricultureMerchandiseMerchandiseTotalTotalIntermodalIntermodal2%1%2%-1%0%1%2%4%1%7%5%5%2%-2%-2%-6%-5%-9%-5%0%4%6%3%3%3%5%4%3%3%2%3%3%1Q122Q123Q124Q121Q132Q133Q134Q131Q142Q143Q144Q141Q152Q153Q154Q151Q162Q163Q164Q161Q172Q173Q174Q171Q182Q183Q184Q18E1Q19E2Q19E3Q19E4Q19EHistorical Rail Industry Volumes and Implied Future GrowthHistorical Rail Industry Volumes and Implied Future Growth(annual ch.;forecast based on current run rate and historical seasonality)2018 +3.7%2018 +3.7%2019 +2.6%2019 +2.6%2017 +3.8%2017 +3.8%2016 (4.7%)2016 (4.7%)2015 (2.2%)2015 (2.2%)Barclays|North America Transportation 16 January 2019 7 EXPD Net Revenue Margin Graphics FIGURE 4 Expect Pressure to Continue in Ocean Freight Net Revenue Margin as Pricing Continues to Strengthen Source:Clarkson Research;Company reports;Barclays Research FIGURE 5 Sustained Airfreight Pricing Strength Likely to Be a Headwind to Margin Improvement Source:Drewry;Company reports;Barclays Research (900)(600)(300)0 300 600 900-45%-30%-15%0%15%30%45%1Q043Q041Q053Q051Q063Q061Q073Q071Q083Q081Q093Q091Q103Q101Q113Q111Q123Q121Q133Q131Q143Q141Q153Q151Q163Q161Q173Q171Q183Q18EXPD Ocean Net