Marginal Improvement At Best

June 29, 2009
Declines in freight volumes may have slowed, but so have exits of capacity

The motor carrier marketplace remains challenging as the rate of capacity exiting the market appears to be slowing. Volumes have not increased sufficiently to take up the slack.

Morgan Stanley Research reported “The improvement in our proprietary [Truckload Freight] Index has stopped.” Even adjusting for seasonality, the analysts report the index, which measures truckload demand against capacity, remainst at all-time lows for June.

The improvements in April and May data don't appear to be supported in June as fuel prices increased, possibly weighing on consumer spending, which translates into lower truckload demand.

“We would expect to see some slowing in the pace of improvement, or even a decline, in the June seasonally adjusted truck tonnage numbers,” said Morgan Stanley. The analysts expect rate declines through the second and third quarters.

Stifel Nicolaus acknowledged the relatively depressed volumes in the second quarter and pointed to the still-declining capacity which has slowed as lenders and lessors “are unwilling to liquidate or repossess in this depressed equipment value market.”

“We believe the transportation companies most likely to beat the Street earnings-per-share consensus in 2Q09 are CSX Corp., Con-way, Inc., Forward Air Corp., Kirby Corp., Norfolk Southern Corp. and Union Pacific,” said a Stifel Nicolaus report.

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