Sluggish demand, record diesel-fuel prices and high maintenance costs from poor winter weather bode poorly for less-than-truckload (LTL...
Sluggish demand, record diesel-fuel prices and high maintenance costs from poor winter weather bode poorly for less-than-truckload (LTL) carriers, which are reporting earnings for the first quarter.
(LTL carriers fill their trucks from various sources and re-sort and redistribute the goods at company terminals along their routes.)
The first LTL carrier to report, Con-way Freight, missed analyst expectations and snipped its outlook for the year.
Yet JPMorgan analyst Thomas Wadewitz says, in a client note, Con-way’s results will be among the sector’s best.
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Wadewitz sees slumping prices, which Con-way blamed on weak demand and “unprecedented” fuel costs, weighing on the sector’s earnings.
Morgan Keegan analyst Art Hatfield expects Saia and Vitran will also be hurt by high costs.
YRC Worldwide, meanwhile, will be affected by regional service changes put in place after a massive reorganization, Hatfield says.
Credit Suisse analyst Jason Seidl predicts freight conditions, weak since the second half of 2006, could worsen.
He says investors are optimistic, based on the uptick in share prices this year, but may pull back after companies report. He favors stocks that have weathered previous slowdowns, such as Con-way and Old Dominion Freight Line.
One bright spot: Arkansas Best used cost-cutting to offset lower tonnage and exceed expectations.