Transportation and Logistics Experts Discuss Prospects For The US Rail Industry: Intermodal Transfer Key To Superior Growth Rates

• On 2:39 pm EDT, Tuesday October 13, 2009

67 WALL STREET, New York - October 13, 2009 - The Wall Street Transcript has just published its Transportation & Logistics Report offering a timely review of the sector to serious investors and industry executives. This 81 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: China Export Tax -- Overcapacity in the Shipping Industry -- Regional Market Balance -- VLCC Traffic Flow -- Asia-Pacific Region Transportation Growth -- US Import/Export Traffic -- Distressed Shipping Balance Sheets -- Terminating Markets -- Tanker Companies Versus Dry Bulk Companies -- Chinese Infrastructure Stimulus -- Real Demand Versus Stimulus Demand -- Monitoring Potential Acquisitions -- Automobile Industry Demand Forecasts -- Demand in Emerging Countries -- Falling Demand -- Future Oversupply -- Growth of Fleets -- Pickups in Infrastructure Spending -- Navigating the Downturn -- Chinese Cell Phones Market Growth -- Affects of Declines in Passenger Flights -- Capacity of Passenger Aircraft -- Improvement in Volumes -- Pricing Margins -- Restructuring and Consolidation -- Chinese Government Ship Building Infrastructure Growth -- Wage Concessions -- Railroad Expansion

Companies include: Diana Shipping (DSX); Star Bulk Carriers (SBLK); Nordic American Tankers (NAT); Overseas Shipholding Group (OSG); General Maritime (GMR); Federal Express (FDX); UPS (UPS); Forward Air (FWRD); Expeditors International (EXPD); Express-1; Tsakos Energy Navigation (TNP); Navios (NM); Vale (VALE); Excel (EXM); Teekay (TK); DryShips (DRYS); UTi Worldwide (UTIW); Old Dominion (ODFL); Arkansas Best (ABFS); J.B. Hunt (JBHT); Con-way (CNW); Atlas Air (AAWW); Air Transport Services Group (ATSG); Norfolk Southern (NSC); Union Pacific (UNP); CSX (CSX); Canadian National Railway (CNI); C.H. Robinson (CHRW); Kuehne and Nagel; Deutsche Post; YRC Worldwide (YRCW); Dynamex (DDMX); Ryder ®

In the following brief excerpt from just one of the 8 interviews in the 81 page report, award winning equity analysts discuss the outlook for the sector and for investors.

TWST: Kevin, as we look out beyond this muted recovery that everybody seems to be taking about, where is growth for this industry, is it still the emerging economies?

Mr. Kirkeby: I want to touch on the rails for a minute. This is for several reasons. First, we've already discussed the asset-based truckers quite extensively. Second, the companies we have under coverage are much more domestically focused. Third, I think a look at where the rails are investing is quite telling and relevant to the question. Outside of the normal capital expenditures, the rails are investing heavily in their intermodal infrastructure. Their growth CapEx is going into double-tracking certain heavily trafficked freight lanes, increasing the clearance at bridges and tunnels so that containers can be stacked two high per rail car, and into building new intermodal transfer facilities. Each of the rails has essentially said that long term, much of their growth will come from the containerization of freight. Not only are customers looking for less expensive transportation options, they are also looking for ways to reduce their carbon footprint. This is in keeping with the green theme favored by the current President. Two of the rails, Norfolk Southern (NSC) and CSX (CSX) , which both operate in the eastern half of the U.S., have discussed quite extensively their corridor strategies, where they believe they can become more efficient and take market share from the trucking companies. CSX is investing in the National Gateway, while Norfolk Southern has the Heartland and Crescent Corridors. Even if the consumer only plays a small role in the next economic recovery, the rails are positioning themselves to grow their volumes, in our view.

TWST: Robin, with your broader perspective, where is the growth going to come from for this space?

Mr. Byde: If you look at FedEx and UPS, there is no doubt in my view that the US market for those companies is ex-growth in terms of small parcel. Both of those companies are looking at expanding much more aggressively in Europe, in Latin America, India and in China domestically. In Europe, UPS is now more aggressively buying-out its service partners. FedEx is looking at growing more quickly domestically in China. So I think for the big US two, they are looking at new markets. They are also looking at new or adapted products such as selling forwarding and freight services in new markets. I have already mentioned increased acquisition activity. I think the answer is new services, new markets and more acquisition growth.

TWST: David, where do you see growth for these guys looking longer term?

Mr. Ross: Longer term, certainly on the rail side, it's in the short-haul intermodal lanes. As Kevin mentioned, the railroads are expanding their track networks again in that segment after reducing their track infrastructure over the last 50-60 years when they lost share to truck. I think also the B2C (business-to-consumer) trend in terms of online commerce will continue to benefit the ground parcel shippers - FedEx, UPS and the U.S. Postal Service - with volume growth at GDP+ rates. Expected modal shift presents another area of growth for some segments, whether it is air-to-ground or truck-to-intermodal, shippers are just rethinking their supply chains in general. Should the shipment really move LTL or can it go truckload? Should it move truckload or can it go rail? And then on top of that I think growth is going to come in the 3PL industry, as logistics experts help shippers figure out that modal optimization and how they should really be shipping their goods.

TWST: So, there is still opportunities as we look long term here?

Mr. Ross: I think so.

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