Asset-Light Companies Hold the Upper Hand in Transportation: A Wall Street Transcript Interview with Kevin W. Sterling, Senior Vice President at BB&T Capital Markets

Wall Street Transcript

67 WALL STREET, New York - October 1, 2013 - The Wall Street Transcript has just published its Transportation and Logistics Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs and Equity Analysts. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Regulatory Issues in the Trucking Industry - Trucking Pricing & Capacity Dynamics - Truckload, LTL, Parcel, Rail and Intermodal - Technology Adoption and Infrastructure Investments

Companies include: FedEx Corporation (FDX), United Parcel Service, Inc. (UPS), Expeditors International of Wa (EXPD), UTI Worldwide, Inc. (UTIW), Pacer International Inc. (PACR), Hub Group Inc. (HUBG), Air Transport Services Group, (ATSG), Atlas Air Worldwide Holdings I (AAWW), Forward Air Corp. (FWRD), Ryder System, Inc. (R), Express-1 Expedited Solutions (XPO), Quality Distribution Inc. (QLTY), Kirby Corporation (KEX), Rand Logistics, Inc. (RLOG), Diana Shipping Inc. (DSX), CAI International Inc. (CAP), Aegean Marine Petroleum Networ (ANW), World Fuel Services Corp. (INT), Dow Chemical Co. (DOW), DuPont Fabros Technology, Inc. (DFT) and many more.

In the following excerpt from the Transportation and Logistics Report, an expert analyst discusses the outlook for the sector for investors:

TWST: Of the companies that fly and the companies that float, which do you think is doing better right now in terms of stock picks?

Mr. Sterling: I think it is important to drill down and become company-specific. Let's start with the companies that float. The big issue in the maritime space is an excess supply of ships. The international shipping industry is overbuilt, and it is a case of too many ships chasing too little demand. But if you drill down into what we consider the Jones Act companies, such as Kirby Corporation or Matson, they are doing very well because of the Jones Act, which is a U.S. cabotage law preventing foreign competition from operating on U.S. waterways. So Kirby and Matson have a competitive advantage.

In particular, Kirby, which is the largest U.S. tank barge company, is doing very well. They haul chemicals, black oil products and refined products. Kirby's largest customers are companies like Dow Chemical (DOW) and DuPont (DFT), and these customers are doing very well because of the low price of natural gas, which is a feedstock for chemical companies, so Kirby has seen an increase in volumes. Additionally, Kirby has begun moving crude oil from some of the shale formations. So Kirby is growing volumes on two fronts, and at the same time has pricing power because the Jones Act limits foreign competition.

TWST: Would you say that the competitive advantage of the companies that you mentioned that have benefited from the Jones Act comes just from the Jones Act, or is it part of certain other benefits that the company can offer or advantages that the companies can offer?

Mr. Sterling: I think it's a little bit of both. The Jones Act helps because you don't have foreign competition, which limits vessel supply and therefore keeps pricing rational. Kirby and Matson also do a great job with service levels in niche businesses. For...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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