Wall Street Transcript Interview with Benjamin J. Hartford, Senior Analyst at Robert W. Baird & Co.: Underlying Freight Stability Yields Margin Improvement

Wall Street Transcript

67 WALL STREET, New York - October 2, 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: Ryder System, Inc. (R), United Parcel Service, Inc. (UPS), FedEx Corporation (FDX), CSX Corp. (CSX), Norfolk Southern Corp. (NSC), Union Pacific Corp. (UNP), Expeditors International of Wa (EXPD), CH Robinson Worldwide Inc. (CHRW), Knight Transportation Inc. (KNX), Werner Enterprises Inc. (WERN), Con-Way, Inc. (CNW), Old Dominion Freight Line Inc. (ODFL), Landstar System Inc. (LSTR), UTI Worldwide, Inc. (UTIW) 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: In terms of the companies that you cover in the sector, a theme that comes up a lot is asset-heavy versus asset-light, and that comes with freight-forwarding, too. Is that something that's playing out in the companies you cover, and if so, how?

Mr. Hartford: A decade ago, the market clearly favored asset-light models for two primary reasons: one, the underlying capacity base was - and is - still very fragmented even 25 years beyond deregulation, and two, end market growth within the logistics sector remained very strong.

There are a couple of concepts that we have introduced recently. First, when you look at the truckload and less-than-truckload models and then look at the asset-light freight brokers, there is an emerging dynamic that favors models that own and control capacity.

Our recommendations have been focused on models that are asset-intensive and have more leverage if growth were to reaccelerate; we have generally been avoiding these pure nonasset based domestic freight brokers, because I do think there are structural challenges that are present today and will be present going forward that were not present a decade ago, which is important for investors to understand. C.H. Robinson and Landstar (LSTR) are models that are facing less favorable dynamics today than a decade ago.

Second, while the outlook for the pure domestic freight brokers has been challenged this cycle given slower end-market growth, more competition and a shrinking capacity base, I do think that the window is starting to open up for international freight-forwarding models like Expeditors and UTi Worldwide (UTIW) - stocks that have been challenged over the course of the past...

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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