3. QE Lowers Rates, Right?
1.25%
1.75%
2.25%
2.75%
3.25%
3.75%
4.25%
4.75%
5.25%
450,000
650,000
850,000
1,050,000
1,250,000
1,450,000
1,650,000
1,850,000
2,050,000
2,250,000
2,450,000
2-May-07 2-May-08 2-May-09 2-May-10 2-May-11 2-May-12 2-May-13 2-May-14
Treasuries held by the Federal Reserve 10 Treasury yield
4. Trucking’s Economic Future
• Why does the Macro seem so bad?
• Tonnage tells a different story
– All modes showing varied degrees of acceleration / improvement
• Transportation Capacity
– Rail speeds slowing / increasing CapEx budgets to expand capacity
– Parcel struggling to meet e-commerce demand / increasing CapEx
– Trucking capacity tight / increasing CapEx & driver pay
• Trucking Capacity Specifically
5. In Tonnage We Trust
• Domestic Truck Tonnage growing at >3% and loads up 2%
• Airfreight was in contraction
– Now Domestic: +1.1%
– European: +5.6%
– Asia Pacific: +7.2%
• Rail Carloadings are up 5.0% overall
– Ex ag and coal: +7.7%
• Grain: +15.1%
• Coal: –3.2%
– Petroleum: +24.7%
• Intermodal is overall up 1.3%
– Stronger domestic intermodal despite service issues
– International container volume is rebounding
33. Trucking Capacity
• Size and Age of the Fleet
– Oldest fleet in history (avg age >6 yrs)
– No additions to current fleets
– Vulture acquisitions
– Trades lead to smaller fleets
• Other Factors
– Regulations shrink capacity further (CSA / EOBR’s / HOS)
– Driver availability / cost
– Shift to or away from / competition from other modes (i.e., intermodal)
– Failure rates starting to go up again
• Transcore Spot Index and Cass TL Pricing Index Both
Establishing All Time Highs
35. -3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
Miles Per Tractor During EOBR
Implementation
Source: Company filings and Avondale Partners estimates
Based on population of trucking companies
which have already gone through the EOBR
adoption process
Q1 is quarter in which we estimate at least
2/3 of fleet was outfitted with EOBRs
46. Truck Production Follows Pricing
80
85
90
95
100
105
110
115
120
125
130
135
140
145
150
155
8,000
13,000
18,000
23,000
28,000
33,000
TruckloadperMilePricingIndex
Class8HDTruckMonthlyProduction
Truckload Pricing vs. Truck Production
Pricing Trend Should Lead Production Trend
Production
Revenue/mile
47. Fleets Pushing CapEx Budgets Higher
-80.0%
-60.0%
-40.0%
-20.0%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
TL Rates vs. Truck Production
ATA Rate per Mile Cl 8 Truck Production
48. Fleets Pushing CapEx Budgets Higher
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
Public TL Net CapEx vs. Class 8 Production
Class 8 Production (left axis)
Public TL Net Capex in $M (right axis)
49. Executive Summary
• Demand is accelerating, in all modes (Truck, Rail, Airfreight)
• Capacity is getting tighter, in all modes
(broadly in Truck, specific areas of Rail, Airfreight)
• Pricing power is surging, in all modes
(broadly in Truck, specific areas of Rail, Airfreight)
• CapEx budgets are being actively revised up, in all modes
50. “Predictions” for 2014 – 2016
• EOBR’s will have a big impact on capacity and an
even bigger impact on equipment visibility
• Driver market gets even tougher
• TL pricing power of 4 to 6++ %
• Consolidation in transportation poised to dramatically increase
• Hard, durable assets increasingly valuable
Editor's Notes
Source file: N:ResearchTransportsfreightvsgdp.xls
Last update: 3/10/2014
Source file: N:ResearchTransportsAirfreightAvondale IndicesAir Indices.xls
Last update: 3/21/2014
Source file: N:ResearchTransportsAirfreightAvondale IndicesAir Indices.xls
Last update: 2/21/2014
Source file: N:ResearchTransportsAirfreightAvondale IndicesAir Indices.xls
Last update: 5/15/2014
Source file: N:ResearchTransportsfreightvsgdp.xls
Last update: 3/7/2014
N:ResearchTransportsRAILClass I Stats2 – Carloads.xls
Last update: 3/21/2014
Source file: N:ResearchTransportsRAILClass I Stats2 – Commodity Volume.xls
Last update: 3/21/2014
Source file: N:ResearchTransportsRAILClass I Stats2 – Commodity Volume.xls
Last update: 3/21/2014
Source file: N:ResearchTransportsRAILClass I Stats2 – Commodity Volume.xls
Last update: 3/21/2014
Source file: N:ResearchTransportsRAILClass I Stats2 – Commodity Volume.xls
Last update: 3/21/2014
Source file: N:ResearchTransportsRAILClass I Stats2 – Commodity Volume.xls
Last update: 3/21/2014
Source file: N:ResearchTransportsRAILClass I Stats2 – Commodity Volume.xls
Last update: 3/21/2014
Source file: N:ResearchTransportsRAILClass I Stats2 – Commodity Volume.xls
Last update: 3/21/2014
N:ResearchTransportsTruckingIndustryATA-TonnageLoads Performance to present.xls
Last update: 8/15/2011
Cyclical shift has happened and will go back the other way.