Analysts lower estimates for trucking companies on slow manufacturing
Stifel Nicolaus analyst David Ross noted that ISM’s manufacturing index generally correlates with less-than-truckload carrier tonnage, which could mean that volume could remain sluggish in the sector through the pre-holiday period.
The Associated Press
10/2/2008
NEW YORK — Two analysts lowered earnings forecasts for several trucking companies on Thursday, suggesting that trucking volumes will worsen as a key indicator points to a weaker-than-expected manufacturing activity.
The Institute for Supply Management on Wednesday said U.S. manufacturing activity contracted more than expected last month, hitting its lowest level since October 2001, as new orders slowed dramatically.
Stifel Nicolaus analyst David Ross noted that ISM’s manufacturing index generally correlates with less-than-truckload carrier tonnage, which could mean that volume could remain sluggish in the sector through the pre-holiday period.
Furthermore, Ross said that capacity has not condensed enough to spur demand for the remaining players.
He cut his third-quarter estimates for Con-way Inc. and YRC Worldwide Inc. -- both of which have lowered their earnings predictions for the period -- as well as Saia Inc., Vitran Corp., Old Dominion Freight Line Inc. and Forward Air Corp.
Ross said that while Forward is not an LTL carrier, it is “significantly exposed” to the weakness in U.S. industrial production.
Less-than-truckload carriers fill their trucks with freight from a variety of sources and might re-sort and redistribute it at a company terminal along their route.
JPMorgan analyst Thomas Wadewitz predicted that transportation demand, especially among trucking companies and parcel carriers, should remain weak at least in the near term. He also suggested that railroads will be hurt by lower volumes, although the group will still be buoyed by strong pricing and ongoing productivity improvements.