行業(yè)會(huì)議總結(jié)與常見(jiàn)問(wèn)題

1、Transportation & LogisticsIndustrials Conference Recap, FAQs and Current Views, Key Differences for the Railroads vs. 2015The Industrials Conference provided an opportunity to discuss implications of the oil price collapse shortly after the latest price war began, although the market did not wait fo

2、r the details and followed the 2015 playbook by selling rail stocks. U.S. rail underperformance during the current correction was the top FAQ over the last week, we expect further weakness could be ahead for stocks which materially outperformed the last two years and are not yet approaching trough m

3、ultiples. However, we find several reasons to be more constructive on the rail stocks in 2020 versus the 2015 template including tailwinds from ESG asset allocation and Hours of Service remaining unchanged in 2020 compared to the material loosening in December 2014. Our top picks continue to have ma

4、rgin self-help we can quantify (NSC, HUBG) or visibility to 1H20 growth (CP) but we would prefer to scale in over time given the current volatility. We are increasingly constructive on railroads with the operations to offset end market headwinds (CSX) or build on recent momentum (UNP) as well as his

5、torical outperformers during market volatility (CHRW). Truckload appears less attractive assuming oil prices stay lower for longer as effective capacity creeps back into the market. Smaller fleets are less fuel efficient than bigger carriers and benefit more from lower diesel prices, while oilfield

6、drivers could look for over-the-road jobs if U.S. oil production begins to decline from current record levels.Conference takeaways: bracing for impact and assessing energy exposure. Companies presenting at the J.P. Morgan Industrials Conference last week had not yet experienced any shipment delays f

7、rom China, but a slowdown was expected in the coming weeks followed by an eventual recovery. The oil price collapse remains the most important driver for transport stocks, especially the railroads which underperformed as the market honed in on energy exposure last week. See page HYPERLINK l _bookmar

8、k0 3 for estimated volumes tied to oil including refined products and steel used in energy activity. CP screens the highest for oil-related risk, but as we discussed with the CFO in our fireside chat, the companys crude by rail volumes are significantly protected by take-or-pay agreements which were

9、 not in place during the last cycle.Rails are better positioned than 2015 but valuation support not quite in sight. We attribute some of the railroad stock weakness last week and year to date to the market executing the 2015 Freight Recession playbook when rail stocks dropped-40% on average. The sto

10、cks could be susceptible to further profit taking after significant outperformance over the last two years and with 2016 trough multiples still -10% to -20% lower after trading peak EPS on peak P/E in February. Beginning on page HYPERLINK l _bookmark9 11, we outline several key differences between r

11、ailroads now and in 2015 which are largely positive and include: 1) hours of service loosened in Dec 2014, but are likely unchanged in 2020, 2) lower risk of a large utility coal de-stocking, 3) headcount declining on higher productivity, 4) less pressure from a strong US$, and5) incremental interes

12、t from ESG investors. Weaker consumer spending and industrial activity are the primary risks from COVID-19 and lower oil prices.Our top picks have margin self-help stories and visibility to 1H20 growth. We continue to favor HUBG and NSC as stocks with self-help opportunities we can quantify and CP w

13、ith visibility to growth in 1H20 as the back-half weighted recovery is pushed out. In light of the market volatility, we would prefer to scale into positions over time and still view NSC as our top pick after underperforming the group since the correction began. CP appeared oversold on a relative ba

14、sis on crude by rail exposure, but has since recovered we wouldNorth America Equity Research16 March 2020Airfreight and Surface TransportationBrian P. Ossenbeck, CFA AC(1-212) 622-1023 HYPERLINK mailto:brian.p.ossenbeck brian.p.ossenbeckBloomberg JPMA OSSENBECK J.P. Morgan Securities LLCKellen J Cur

15、ry(1-212) 622-0717 HYPERLINK mailto:kellen.j.curry kellen.j.curryJ.P. Morgan Securities LLCMatt V Fallon(1-212) 622-6431 HYPERLINK mailto:matt.v.fallon matt.v.fallonJ.P. Morgan Securities LLCShreshth Mahajan(91-22) 6157 3055 HYPERLINK mailto:shreshth.mahajan shreshth.mahajanJ.P. Morgan India Private

16、 LimitedSee page 19 for analyst certification and important disclosures, including non-US analyst disclosures.J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affe

17、ct the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision. HYPERLINK / Brian P. Ossenbeck, CFA (1-212) 622-1023 HYPERLINK mailto:brian.p.ossenbeck brian.p.ossenbeckNorth America Equity Research16 March 2020look to buy on any

18、future flare ups on CBR given CPs contractual protections.Where we are getting more constructive: CHRW, CSX, and UNP. Truckload brokers historically outperformed in periods of market volatility and despite concerns of disruption and competition, we are increasingly constructive on CHRW. In fact, our

19、 recent fireside chat with a world-renowned expert on artificial intelligence provided some reassurance that truckload brokerage would not be completely automated away. We are also leaning more positive on CSX which has shrugged off the concerns from our October 2019 downgrade while UNP continues to

20、 build operating momentum in tough conditions. Dividend yield plays are increasingly popular and UPS screens well, combined with a new CEO, but we are cautious of deteriorating earnings quality against a volatile economic backdrop.Lower for longer oil price will slow the speed of the truckload rate

21、recovery. We expect the rush for consumer durables and other goods in preparation for potential restrictions to contain the spread of COVID-19 will trigger a temporary boost in truckload demand. However, lower oil prices will likely delay the pace of the rate cycle recovery as smaller fleets find re

22、lief from lower diesel prices considering they run at a 29% higher fuel cost per mile compared to larger carriers. In general, smaller carriers run older, less efficient equipment and do not have as favorable of a fuel surcharge program as bigger fleets. Recent truckload capacity cuts would be muted

23、 even further if U.S. oil production declines from record levels and send drivers back to over-the-road work from hauling energy-related commodities.Other FAQs and lessons from the last two corrections. We received a number of questions on the potential for a margin call impacting the largest holder

24、 of KNX and the stock, but we view the risk as limited (page 6). ESG will become one of the more prevalent themes in transports, the U.S. rails screen favorably and we recommend adding ESG as a factor to monitor (page HYPERLINK l _bookmark7 10). Other FAQs include potential valuation support for the

25、 rail stocks (page HYPERLINK l _bookmark2 4), the expected COVID snapback in China despite weak port activity (page HYPERLINK l _bookmark6 9), and implications for greater truck vs. rail competition at lower diesel prices (page HYPERLINK l _bookmark4 7). In addition, we put some context around the c

26、urrent correction by compiling peak to trough EPS and rail volume declines during the GFC and 2015 Freight Recession (page HYPERLINK l _bookmark14 17).FAQs from the Last WeekWhat were the primary takeaways from the Industrials Conference?One of the clear takeaways was that railroad stocks did not ac

27、t as defensive as expected, although they had materially outperformed industrials and other transports over the past two years. Aside from concerns over CPs crude by rail exposure, other explanations or theories for relative performance between the stocks were elusive and could be a signal of furthe

28、r volatility ahead. Overall, the companies presenting stated they were not experiencing any COVID-19 related delays to freight activity from China, although some saw an uptick from domestic truckload as consumer staples flew off the shelves in preparation for potential U.S. quarantines. The companie

29、s are preparing for some impact in the coming weeks, followed by a subsequent recovery, and we expect further details on the upcoming 1Q20 earnings calls. Lastly, our fireside chat with a world-renowned expert on artificial intelligence provided a glimmer of hope that not all truckload brokers would

30、 be automated away.What is the energy exposure by railroad and are there any offsetting factors? We initially noted the OPEC price war was most negative for the railroads based on energy exposure and the prospect of lower for longer oil prices delaying the expected recovery in truckload rates as sma

31、ller carriers find some relief at the pump. As shownin HYPERLINK l _bookmark0 Figure 1, CP has the highest headline energy exposure, but is protected by take-or- pay provisions in crude by rail, while KSUs refined product volume is tied to Mexicos weakening demand (see page HYPERLINK l _bookmark1 4)

32、, and the Canadian rails have more frac sand leverage than UNP. In addition to the headline carload categories, we added estimated steel demand from the energy sector as well as ethanol and refined products as consumption is likely to fade in the near term as COVID-19 precautions restrict activity.

33、We discussed the underlying take-or-pay provisions with the CFO of CP during our fireside chat (details here), these measure protect 2020 guidance even if no more CBR shipped beyond 1Q20. Notably, these provisions were triggered in 2019 at least once and generated $20mm of liquidated damages in 3Q19

34、.Figure 1: CP screens the highest on energy exposure but has protections for volume shortfalls embedded in take-or-pay provisions% of 2019 volumeEstimated Energy Sector ExposureEthanolRefined Prod.Steel ScrapSteel DemandFrac SandCrudeTotalCP19 bpsKSU368 bpsCSX6 bpsNSC19 bpsCP206 bpsCP412 bpsCP8.3%UN

35、P14 bpsUNP251 bpsNSC6 bpsCSX11 bpsCN154 bpsCN167 bpsKSU5.9%CSX13 bpsCSX198 bpsKSU4 bpsKSU9 bpsUNP146 bpsKSU124 bpsCN5.0%NSC13 bpsCP183 bpsCP3 bpsUNP9 bpsNSC98 bpsNSC82 bpsUNP4.9%CN7 bpsCN163 bpsUNP3 bpsCN4 bpsKSU86 bpsUNP70 bpsNSC3.6%KSU2 bpsNSC145 bpsCN2 bpsCP4 bpsCSX59 bpsCSX59 bpsCSX3.5%Source: C

36、ompany reports, J.P. Morgan estimatesFigure 2: Mexicos gasoline demand has faltered since 4Q19000 barrels per daySource: Secretaria de EnergiaFigure 3: while inventory levels have remained elevated in 2020Days of demand in storageSource: Secretaria de EnergiaWhere will railroad stock valuations bott

37、om out versus prior corrections?We do not expect the stocks will hit trough valuation on trough EPS like the last Freight & Industrial Recession in early 2016, primarily because the operating models are more robust and the outlook for volume growth had already softened entering 2020 after a down 201

38、9. We expect the stocks will bottom-out in the 11-13x range on current forward P/E (which is undoubtedly too high) after de-rating between -13% to-30% from the February 2020 market peak. The rail stocks are well off trading peak EPS on peak valuations, but only NSC has roughly 10% downside risk to t

39、he prior trough multiple while UNP has nearly 20% downside (see HYPERLINK l _bookmark2 Figure 4). Overall, we see more reasons to be constructive on rail stocks compared to the most recent energy- related market turmoil in 2015, see page HYPERLINK l _bookmark8 10 for details.Figure 4: NSC has de-rat

40、ed the most from the February peak and has the least downside to where P/E bottomed in early 2016Historical trough multiples vs. current forward consensus P/E0%(10%)(20%)(30%)(40%)(50%)(60%)SPXNSCKSUCSXCNRCPUNPFreight/Industrial RecessionEuro Crisis/Fiscal CliffFinancial CrisisSource: Bloomberg, J.P

41、. Morgan estimatesDo you see anything to own right now? Where is sentiment most/least positive? We continue to favor stocks with self-help opportunities we can quantify such as HUBG and NSC along with companies that have visibility to growth in 1H20 as the back-half weighted recovery is pushed out.

42、In light of the market volatility, we wouldlikely scale in to positions over time and still view NSC as our top pick after underperforming the group since the correction began. CP appeared oversold on a relative basis following the OPEC price war and concern on crude by rail exposure but has since r

43、ecovered. Sentiment appears most positive on UPS, KNX and CSX in our recent conversations and more negative on FDX and JBHT.Are there any stocks that are getting more or less interesting at current levels? With a healthy appreciation of the recent market volatility and rapidly evolving COVID-19 impa

44、ct on the U.S., we are not making any ratings changes at present. However, we are increasingly positive on CSX after it shrugged off export coalconcerns, UNP where operating efficiency is building momentum, and CHRW which offers some degree of defense (more in the following FAQ). UPS is more interes

45、ting with a new CEO (see our initial takeaway here) although a high dividend yield does not offset deteriorating earnings quality in our view. KNX and SNDR look more interesting closing in on June 2019 levels before the turn in truckload rates became more popular. However, we are concerned the indus

46、try could face a COVID-related demand shock followed by a longer drag on supply from lower oil prices.Is it a good time to increase exposure to brokers and asset-light companies? The truckload brokers have outperformed in the recent correction as these business models tend to outperform during slowe

47、r periods of economic activity. We believe the brokers, primarily CHRW, will remain a more defensive play after the companyrecently boosted SG&A for tech spending and reset contract bid prices lower. During the financial crisis, C.H. was the only transport we cover to grow earnings in 2008 and 2009.

48、 The fear of disruption will likely weigh on valuation in a soft freight market, but we expect the truckload market will remain cyclical and net revenue margins will expand again but greater productivity is needed to offset competition.Is the truckload rate cycle at risk of fading or stagnating?We e

49、xpect the more recent impact from COVID-19 related demand for food and consumer durables ahead of potentially tighter restrictions to contain the spread will generate additional truckload activity. However, this pull-forward will fade as consumer spending falls and we also expect the lower for longe

50、r oil price environment will dampen capacity curtailments that had been on the rise. The American Transportation Research Institute estimates the fuel cost per mile of a fleet with fewer than five power units is 29% higher than one with over 1,000 units. We note the smaller fleets which comprise the

51、 majority of industry capacity typically benefit more from lower fuel prices than the larger fleets. Big carriers run more efficient equipment with favorable surcharge programs relative to the smaller carriers. In addition, if oil field activity declines there could be an influx of drivers moving ba

52、ck to over the road jobs which could further dampen rates.Figure 5: The widely anticipated TL rate cycle recovery will not likely be a 2H20 eventTL Cycle Status: Recovery Supply cuts demand declineSupplyDemandSource: J.P. Morgan estimatesWill there be another margin call for the largest holder of KN

53、X?Investors in Knight-Swift were asking if the complicated finances of the stocks largest holder, Jerry Moyes, could trigger another margin call and put pressure on KNX similar to December 2018. We believe the risk of forced selling in KNX is fairly low and certainly lower than the last time when th

54、e company ended up purchasing $29.3mm of stock from Moyes at roughly $25 per share. With multiple tranches of the variable pre-paid forwards coming due March through July 2020, we believe the counterparty is fully hedged by shorting KNX at this time. Although one tranche of the VPF was rolled forwar

55、d last month pre-market volatility, we believe these agreements are becoming more expensive to renew. If the remaining VPFs are share settled the counterparty will most likely use the shares of KNX to cover their short position with minimal impact to the stock.How will a lower oil price environment

56、affect truck/railroad competition? The disparity between smaller and larger truckload carriers on fuel efficiency, equipment age and purchasing power is evident when reviewing large fleet fuel expense as a percentage of revenue which has narrowed the gap with railroads ( HYPERLINK l _bookmark3 Figur

57、e 5). Although the railroads face a softer truck market for the foreseeablefuture, we expect they continue to compete for conversions on improving service and to a lesser extent recently re-opened intermodal lanes. Unsurprisingly, we found the fuel surcharge per loaded mile tracked diesel prices clo

58、sely for the Eastern rails where truckload competition is the highest and were less sensitive in the West.Norfolk historically held the highest exposure to WTI-linked fuel surcharges but we believe the amount has drifted lower over time and is likely less than 25% of the revenue base on a two month

59、lag, which implies an impact in 2Q20 and beyond.Figure 6: Large TL carriers utilized new tractors to help narrow the gap with rails on fuel expenseFuel % of total revenueDiesel price per gallon21%19%17%15%13%11%9%7%201420152016201720182019$4.00$3.80$3.60$3.40$3.20$3.00$2.80$2.60$2.40$2.20$2.00Truck

60、fuel expense/revenue Rail fuel expense/revenue Average diesel price (RHS)Source: Company reports, J.P. Morgan estimatesHow much will a potential frac sand volume collapse hurt UNP?There appears to be an increasing concern over UNPs frac sand exposure although as noted in HYPERLINK l _bookmark5 Figur