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雷达卡
We remain attractive on freight given early cycle
qualities and signs of a volume rebound. While
top-line results were generally below consensus, the
recent sell-off in shares creates an interesting entry
point. We believe 2010 estimates are too low across the
group, but most notably in rails. While there is little
visibility on recovery, mgmt commentary was overly
cautious, in our view. Easy comps will set up strong Y/Y
volume growth in 2010, and Y/Y pricing declines should
turn positive next year. Rails (esp. UNP) remain our top
pick in freight. Valuation is more attractive and markets
are underestimating mid-cycle margins and op leverage
to a rebound given productivity gains and the potential
for pricing to reaccelerate in 2010, in our view.
Railroads: 1H/10 EPS could surprise. Key takeaways:
1) Rail EPS have troughed and 2010 consensus is now
too low. 2) Volume run-rates suggest substantial Y/Y
growth in 1H/10, which should drive improved sentiment.
3) Productivity gains are driving much better than
expected costs, which should produce substantial op.
leverage in a rebound; 4) Pricing gains are slowing,
particularly in truck competitive products. However,
concerns about a collapse appear overdone. We see
evidence that pricing could reaccelerate in 1H10.
Truckload: 3Q09 supports our view that a TL pricing
recovery could take longer than expected. We think the
stocks could be range bound near-term. Key
takeaways: 1) Cost control and fleet optimization
continue to surprise, but these gains may be difficult to
sustain in recovery; 2) Pricing is weak (worse or inline
with 2Q09) but stable with few signs of a sharp recovery.
3) Capacity remains abundant and is slow to exit, which
should dampen the impact of any rebound in demand.
Parcel: Largely in line. 1) Volumes appear to be
bottoming (w/ int’l growing again), but no sign of a strong
recovery. 2) Pricing remains competitive. 3) Cost
control was mildly disappointing given improving int’l
volumes. While UPS offers leverage to a recovery, the
stock isn’t cheap and EPS recovery could disappoint
given a number of secular headwinds.
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