1
00:00:07,480 --> 00:00:10,840
Speaker 1: Hi everyone, this is Lee Clasgow when We're Talking Transports.

2
00:00:11,119 --> 00:00:14,600
Speaker 1: Welcome to Bloomberg Intelligence Talking Transports podcast. I'm your host,

3
00:00:14,720 --> 00:00:19,880
Speaker 1: Lee Clasgow, senior Freight transportation and Logistics analysts at Bloomberg Intelligence,

4
00:00:19,880 --> 00:00:23,239
Speaker 1: Bloomberg's in house research arm of almost five hundred analysts

5
00:00:23,239 --> 00:00:26,880
Speaker 1: and strategists around the world. Before diving in a little

6
00:00:26,880 --> 00:00:30,560
Speaker 1: public service announcement, your support is instrumental to keep bringing

7
00:00:30,640 --> 00:00:34,120
Speaker 1: great guests in conversations to you, our listeners, and we

8
00:00:34,159 --> 00:00:37,200
Speaker 1: need your support. So please, if you enjoy this podcast,

9
00:00:37,479 --> 00:00:40,440
Speaker 1: share it, like it, and leave a comment. Also, if

10
00:00:40,440 --> 00:00:42,960
Speaker 1: you have any ideas for future episodes or just want

11
00:00:42,960 --> 00:00:46,120
Speaker 1: to talk transports, please hit me up on the Bloomberg terminal,

12
00:00:46,200 --> 00:00:49,519
Speaker 1: on LinkedIn or on Twitter at Logistics Lee. Now on

13
00:00:49,600 --> 00:00:52,640
Speaker 1: to our episode today, we're going to be doing something

14
00:00:52,680 --> 00:00:55,320
Speaker 1: a little different. Your guest is going to be me

15
00:00:55,560 --> 00:00:59,920
Speaker 1: Lee Klaskow, senior freight transportation and logistics analysts at Bloomberg Intelligence,

16
00:01:00,080 --> 00:01:02,200
Speaker 1: and we're going to talk to you today about the

17
00:01:02,640 --> 00:01:06,480
Speaker 1: outlook for the trucking market for twenty twenty five, and

18
00:01:06,520 --> 00:01:09,160
Speaker 1: we're also going to touch upon the railroad industry as well,

19
00:01:09,240 --> 00:01:13,319
Speaker 1: So buckle in. Hopefully this will be insightful and I

20
00:01:13,360 --> 00:01:17,560
Speaker 1: look forward to your comments of following the episode. You know,

21
00:01:17,600 --> 00:01:21,360
Speaker 1: when we're looking at the freight transportation logistics market at

22
00:01:21,400 --> 00:01:25,360
Speaker 1: Bloomberg Intelligence, we take a top down and bottoms up

23
00:01:25,360 --> 00:01:28,160
Speaker 1: approach to the markets, and so you know what we

24
00:01:28,240 --> 00:01:30,080
Speaker 1: have to do is we have to kind of figure out,

25
00:01:30,120 --> 00:01:32,520
Speaker 1: you know, what's going on in the world and you know,

26
00:01:32,560 --> 00:01:34,680
Speaker 1: how is that going to impact the demand for freight

27
00:01:34,959 --> 00:01:38,240
Speaker 1: in the individual companies that we cover. Well, you know,

28
00:01:38,480 --> 00:01:41,080
Speaker 1: it's going to be challenging out there. There's no if

29
00:01:41,160 --> 00:01:43,160
Speaker 1: stends or butts about it. You know, we have two

30
00:01:43,200 --> 00:01:46,160
Speaker 1: major wars still going on, one in the Middle East

31
00:01:46,200 --> 00:01:49,320
Speaker 1: and one in Europe, and intensions in the Middle East

32
00:01:49,560 --> 00:01:52,720
Speaker 1: seem to be flaring up, not down. We have a

33
00:01:52,800 --> 00:01:56,440
Speaker 1: lot of unknowns with the Due administration coming into the US.

34
00:01:56,960 --> 00:01:59,960
Speaker 1: We're not really sure what Trump is going to do

35
00:02:00,520 --> 00:02:04,400
Speaker 1: when it comes to immigration and tariffs, which both can

36
00:02:04,440 --> 00:02:08,679
Speaker 1: be extremely inflationary. And speaking of inflation, inflation is still

37
00:02:08,680 --> 00:02:12,160
Speaker 1: an issue. You know, people are grappling with higher costs.

38
00:02:12,720 --> 00:02:14,840
Speaker 1: You know, one of my favorite charts on the Bloomberg

39
00:02:14,919 --> 00:02:20,760
Speaker 1: terminal is eggs CPI. That's not a delicious breakfast option.

40
00:02:21,520 --> 00:02:23,720
Speaker 1: Really what it at tracks is the cost of eggs,

41
00:02:24,200 --> 00:02:26,680
Speaker 1: and they're up thirty seven percent year over a year,

42
00:02:27,160 --> 00:02:29,600
Speaker 1: even though they're down nine percent from their twenty twenty

43
00:02:29,639 --> 00:02:34,120
Speaker 1: three highs. So you know, costs are a major aspect.

44
00:02:34,880 --> 00:02:37,639
Speaker 1: You know, when CPI is expected to moderate next year,

45
00:02:37,680 --> 00:02:40,000
Speaker 1: that's the good news. So on the Bloomberg terminal, if

46
00:02:40,040 --> 00:02:43,080
Speaker 1: you go to ECFC go or enter for those in

47
00:02:43,120 --> 00:02:47,480
Speaker 1: the no what we see here is, you know, consensus

48
00:02:47,520 --> 00:02:52,280
Speaker 1: expectations for various macro indices. So with CPI, which is

49
00:02:52,320 --> 00:02:55,079
Speaker 1: a gauge for inflation, that's expected to come in two

50
00:02:55,160 --> 00:02:59,320
Speaker 1: point nine percent in twenty twenty four. Obviously, that's that's

51
00:02:59,320 --> 00:03:03,960
Speaker 1: that's good, though it's relatively high from historical standpoints because

52
00:03:04,000 --> 00:03:06,760
Speaker 1: it's down from eight percent in twenty twenty two, and

53
00:03:06,800 --> 00:03:09,959
Speaker 1: that that kind of movement of downward is supposed to

54
00:03:10,000 --> 00:03:14,239
Speaker 1: continue next year, according to consensus, is going to moderate

55
00:03:14,280 --> 00:03:17,840
Speaker 1: to two point four percent in twenty twenty five. GDP

56
00:03:18,200 --> 00:03:21,040
Speaker 1: is also expected to moderate, which is not good. This year.

57
00:03:21,080 --> 00:03:24,079
Speaker 1: Growth was expected are two point seven percent. Next year,

58
00:03:24,120 --> 00:03:27,040
Speaker 1: the consensus is at two point one percent in twenty

59
00:03:27,080 --> 00:03:30,280
Speaker 1: twenty five, but there's a lot of uncertainty with that number.

60
00:03:30,760 --> 00:03:32,360
Speaker 1: You know my view, you know, even though I'm not

61
00:03:32,360 --> 00:03:34,760
Speaker 1: an economist, nor do I play one on TV. You know,

62
00:03:34,800 --> 00:03:36,320
Speaker 1: it could go up a lot or it could go

63
00:03:36,400 --> 00:03:39,640
Speaker 1: down a lot, depending you know, on the new administration coming,

64
00:03:40,360 --> 00:03:42,960
Speaker 1: you know, in the US, because we again we really

65
00:03:42,960 --> 00:03:46,360
Speaker 1: don't know what the tarifs are actually going to be

66
00:03:46,560 --> 00:03:49,960
Speaker 1: versus the you know, the saber rattling, and we really

67
00:03:50,000 --> 00:03:52,240
Speaker 1: don't know what the immigration policy is going to be,

68
00:03:53,160 --> 00:03:55,960
Speaker 1: and so those those two things could have positive and

69
00:03:56,000 --> 00:04:01,720
Speaker 1: negative implications for economic growth. And then we have industrial production.

70
00:04:01,840 --> 00:04:03,760
Speaker 1: This is a number you know, we look at closely

71
00:04:03,800 --> 00:04:06,640
Speaker 1: when we're looking at the less than truckload market, the

72
00:04:06,760 --> 00:04:10,040
Speaker 1: LTL market. You know, that was down or expected to

73
00:04:10,080 --> 00:04:13,600
Speaker 1: be down zero point one percent this year, and we're

74
00:04:13,640 --> 00:04:15,720
Speaker 1: expected growth next year one point three percent. So that

75
00:04:15,840 --> 00:04:18,360
Speaker 1: is good news. You know, that's good news for LTL carriers,

76
00:04:18,880 --> 00:04:21,240
Speaker 1: and it's also a good news for good news for

77
00:04:21,520 --> 00:04:24,839
Speaker 1: a large part of rail demand as well. And just

78
00:04:24,839 --> 00:04:27,279
Speaker 1: sticking on ltls for a little bit, you know, another

79
00:04:27,720 --> 00:04:31,719
Speaker 1: macro index that we use to kind of gauge demand

80
00:04:31,880 --> 00:04:35,560
Speaker 1: is the ISM index, and it's you know, we've again

81
00:04:35,680 --> 00:04:38,320
Speaker 1: we've views it a major proxy for LTL demand. You know,

82
00:04:38,360 --> 00:04:42,080
Speaker 1: that's been in contraction territory for twenty four of the

83
00:04:42,120 --> 00:04:45,080
Speaker 1: last twenty five months. So you know what that's telling

84
00:04:45,200 --> 00:04:48,000
Speaker 1: us is the next three months is probably not going

85
00:04:48,080 --> 00:04:50,760
Speaker 1: to be great for LTL demand. You know, we've seen

86
00:04:51,440 --> 00:04:55,520
Speaker 1: demand quote unquote not being great for a lot of

87
00:04:55,520 --> 00:05:00,480
Speaker 1: the carriers that report monthly data. In November more or

88
00:05:00,560 --> 00:05:03,440
Speaker 1: less it was in align with expectations. But you know,

89
00:05:03,480 --> 00:05:05,919
Speaker 1: it's just the backdrop is tough there for for the

90
00:05:06,040 --> 00:05:09,039
Speaker 1: lt L carriers because you know, they don't no longer

91
00:05:09,040 --> 00:05:12,600
Speaker 1: have the they have more difficult comps coming off of

92
00:05:12,680 --> 00:05:16,360
Speaker 1: the Yellow bankruptcy of last year. So you know, that's

93
00:05:16,440 --> 00:05:18,720
Speaker 1: kind of the macro setup and how we're looking at

94
00:05:18,720 --> 00:05:22,440
Speaker 1: the overall trucking market, you know, and so when when

95
00:05:22,480 --> 00:05:26,800
Speaker 1: we're looking at the the the various modes of transportation,

96
00:05:28,200 --> 00:05:30,960
Speaker 1: you know we're going to first, I guess, you know,

97
00:05:31,000 --> 00:05:34,279
Speaker 1: for this conversation, start with the truckload market. Uh. You know.

98
00:05:34,360 --> 00:05:39,159
Speaker 1: And one of the great things about Bloomberg the Terminal,

99
00:05:39,240 --> 00:05:42,040
Speaker 1: at least from an analyst standpoint and someone that follows

100
00:05:42,040 --> 00:05:45,480
Speaker 1: the freight markets, is we have so much third party data.

101
00:05:46,080 --> 00:05:49,240
Speaker 1: I'm only going to touch upon a few of the contributors.

102
00:05:50,640 --> 00:05:53,640
Speaker 1: You know that that we use, uh, you know one

103
00:05:53,640 --> 00:05:56,880
Speaker 1: of those is is FTR. You know what we use

104
00:05:57,040 --> 00:05:59,640
Speaker 1: is a couple of their data points when we're looking

105
00:05:59,640 --> 00:06:03,360
Speaker 1: at the markets. They have a truck utilization index and

106
00:06:03,839 --> 00:06:07,520
Speaker 1: it's still well below historical levels, but it's been steadily

107
00:06:07,600 --> 00:06:11,920
Speaker 1: improving since bottoming in the second quarter of twenty twenty three.

108
00:06:12,400 --> 00:06:17,799
Speaker 1: As excess capacity slowly exits the spot truckload market. FTR

109
00:06:17,920 --> 00:06:21,880
Speaker 1: is forecasting average utilization rates to reach ninety three percent

110
00:06:22,720 --> 00:06:25,920
Speaker 1: by the end of this year from about eighty nine

111
00:06:25,960 --> 00:06:29,600
Speaker 1: percent from that trough. So you know, it's slowly increasing

112
00:06:30,560 --> 00:06:34,320
Speaker 1: and then reaching ninety five point two by the end

113
00:06:34,320 --> 00:06:37,200
Speaker 1: of next year, and this will be above the current

114
00:06:37,279 --> 00:06:40,960
Speaker 1: twenty year average of ninety one point one. So you

115
00:06:41,000 --> 00:06:46,600
Speaker 1: know that's that's really really good news because rates tend

116
00:06:46,640 --> 00:06:51,800
Speaker 1: to do much better when that index is ninety five

117
00:06:51,839 --> 00:06:56,000
Speaker 1: percent or higher. And so you know what that's telling

118
00:06:56,120 --> 00:07:00,960
Speaker 1: us is that capacity will be tightening. We don't know

119
00:07:01,000 --> 00:07:04,520
Speaker 1: if it's going to be necessarily tight capacity, but it's

120
00:07:04,560 --> 00:07:06,880
Speaker 1: definitely going to be It looks like it's going to

121
00:07:06,920 --> 00:07:09,800
Speaker 1: be better where from where we are, again, a lot

122
00:07:09,800 --> 00:07:12,600
Speaker 1: of uncertainty that can change a lot depending on you know,

123
00:07:12,680 --> 00:07:17,280
Speaker 1: what the Trump Administration's policies actually end up looking for

124
00:07:17,440 --> 00:07:20,760
Speaker 1: once they get they implemented. And you know, when we're

125
00:07:20,800 --> 00:07:24,320
Speaker 1: looking at demand, you know, while we use FTR kind

126
00:07:24,320 --> 00:07:28,000
Speaker 1: of like as maybe a benchmark, you know, we do

127
00:07:28,000 --> 00:07:32,280
Speaker 1: do our own work on expectations. You know, they're you know,

128
00:07:32,480 --> 00:07:37,840
Speaker 1: expecting truckload volume to rise point four percent in twenty

129
00:07:37,920 --> 00:07:42,440
Speaker 1: twenty four and accelerate to one point six percent in

130
00:07:42,520 --> 00:07:45,600
Speaker 1: twenty twenty five, and then to two percent in twenty

131
00:07:45,600 --> 00:07:49,040
Speaker 1: twenty six. My crystal ball in twenty twenty six is

132
00:07:49,280 --> 00:07:51,880
Speaker 1: a little foggy, but you know, if we're looking at

133
00:07:51,920 --> 00:07:54,080
Speaker 1: next year, how I'm going to frame it is, you know,

134
00:07:54,120 --> 00:07:56,840
Speaker 1: I'm really going to look just a GDP and probably

135
00:07:57,040 --> 00:07:59,600
Speaker 1: model and number somewhere there. And you know, as we

136
00:07:59,680 --> 00:08:03,120
Speaker 1: mentioned earlier, GDP is expected to be around two point

137
00:08:03,200 --> 00:08:05,560
Speaker 1: one percent next year, So that's kind of like our

138
00:08:05,600 --> 00:08:10,440
Speaker 1: base case for for demand on the truckload market. The

139
00:08:10,480 --> 00:08:13,760
Speaker 1: good news is, you know, when we're looking at demand,

140
00:08:13,800 --> 00:08:17,280
Speaker 1: looking at the GDP, you know, the Fed does appear

141
00:08:17,440 --> 00:08:21,200
Speaker 1: to have orchestrated a soft landing, with the probability of

142
00:08:21,200 --> 00:08:24,880
Speaker 1: a US recession reduced to about twenty five percent from

143
00:08:24,880 --> 00:08:28,119
Speaker 1: a high of sixty five percent in July, and that's

144
00:08:28,360 --> 00:08:31,800
Speaker 1: again based on consensus on the Bloomberg terminal. So it

145
00:08:31,840 --> 00:08:33,600
Speaker 1: looks like we're kind of out of the woods in

146
00:08:33,640 --> 00:08:38,720
Speaker 1: terms of recession and next year. So that's good news.

147
00:08:38,960 --> 00:08:42,400
Speaker 1: And again we don't know that growth low single digits,

148
00:08:42,440 --> 00:08:44,440
Speaker 1: it's going to be a little higher than that, or

149
00:08:44,520 --> 00:08:45,800
Speaker 1: is it going to be a little lower than that,

150
00:08:45,880 --> 00:08:50,000
Speaker 1: And again that's really going to be debated or dependent

151
00:08:50,040 --> 00:08:53,760
Speaker 1: on you know, where we see, you know, the policies

152
00:08:53,760 --> 00:08:58,079
Speaker 1: from the new administration heading out. So you know, that

153
00:08:58,559 --> 00:09:02,440
Speaker 1: looks like trucking condition should be more favorable next year,

154
00:09:03,840 --> 00:09:07,400
Speaker 1: which is of course great news. Uh. You know, we

155
00:09:07,440 --> 00:09:12,360
Speaker 1: look at FTRS Truck Condition Index and that is expected

156
00:09:12,640 --> 00:09:16,400
Speaker 1: to term positive next year. So that is a net

157
00:09:16,480 --> 00:09:20,600
Speaker 1: positive for the overall markets. And so you know, what

158
00:09:20,720 --> 00:09:22,880
Speaker 1: is that going to do? So we have it seems

159
00:09:22,920 --> 00:09:27,120
Speaker 1: like a better supply and demand market and that should

160
00:09:28,200 --> 00:09:31,559
Speaker 1: bode well for rates, it should bode well for earnings,

161
00:09:31,640 --> 00:09:34,560
Speaker 1: and it should bode well for revenue of trucking companies.

162
00:09:34,760 --> 00:09:37,800
Speaker 1: So the trucking companies that we follow at Bloomberg Intelligence,

163
00:09:38,320 --> 00:09:40,280
Speaker 1: you know, these are the large companies like a JB.

164
00:09:40,400 --> 00:09:43,680
Speaker 1: Hunt or Werner or night Swift. You know, they play

165
00:09:43,800 --> 00:09:46,360
Speaker 1: predominantly in a contractual market. So, you know, while we

166
00:09:46,440 --> 00:09:49,920
Speaker 1: do follow the spot market very closely because it's kind

167
00:09:49,960 --> 00:09:53,600
Speaker 1: of like a leading indicator for the contractual market, you know,

168
00:09:53,640 --> 00:09:58,920
Speaker 1: we really focus on contractual rates, uh here at Bloomberg Intelligence,

169
00:09:59,200 --> 00:10:02,880
Speaker 1: and you know, when you're looking at you know, next year,

170
00:10:03,480 --> 00:10:06,960
Speaker 1: you know, we think that rates on the contractual side

171
00:10:07,240 --> 00:10:11,240
Speaker 1: could start inch higher early next year, and that could

172
00:10:11,280 --> 00:10:15,480
Speaker 1: accelerate to high single digit growth by the year's end.

173
00:10:15,880 --> 00:10:18,760
Speaker 1: And if you put this all together, this might yield

174
00:10:18,840 --> 00:10:22,040
Speaker 1: a high single digit rate increase for twenty twenty five.

175
00:10:22,360 --> 00:10:26,959
Speaker 1: Obviously that's good news. And you know, we're we're basing

176
00:10:27,000 --> 00:10:30,200
Speaker 1: that conclusion because it really does appear the spot market

177
00:10:30,280 --> 00:10:35,359
Speaker 1: has bottom and we're also seeing an increase in tender rejections,

178
00:10:35,600 --> 00:10:39,800
Speaker 1: which may indicate that the market is tightening. You know,

179
00:10:39,840 --> 00:10:41,640
Speaker 1: when one of the other things that we look at

180
00:10:41,800 --> 00:10:46,400
Speaker 1: is truck stops market demand indecks. They're MDI index, you know,

181
00:10:46,480 --> 00:10:50,120
Speaker 1: and that's been up around eighteen percent quarter to date,

182
00:10:50,400 --> 00:10:53,400
Speaker 1: so you know that's selling us things are getting again.

183
00:10:53,559 --> 00:10:55,880
Speaker 1: We don't think they're getting tighter, but they're getting a

184
00:10:55,880 --> 00:11:00,400
Speaker 1: lot less looser, and and that's that's definitely that's definitely

185
00:11:00,480 --> 00:11:04,800
Speaker 1: good news for the trucking environment. And so you know,

186
00:11:05,480 --> 00:11:09,400
Speaker 1: we have mid single digit contractual rate increases, we have

187
00:11:09,559 --> 00:11:14,360
Speaker 1: low single digit you know, demand growth for twenty twenty five,

188
00:11:14,720 --> 00:11:20,040
Speaker 1: you know, and that could drive truckload carriers revenues up

189
00:11:20,080 --> 00:11:23,760
Speaker 1: mid single digits. And according to consensus of the Bloomberg

190
00:11:23,800 --> 00:11:27,360
Speaker 1: Intelligence Truckload peer group, it could drive earnings per share

191
00:11:27,559 --> 00:11:31,960
Speaker 1: sixty seven percent higher in twenty twenty five. You know,

192
00:11:32,200 --> 00:11:35,800
Speaker 1: just be mindful, over the last two years, earnings per share,

193
00:11:35,840 --> 00:11:38,960
Speaker 1: we're down around fifty percent each year. So it's not

194
00:11:39,000 --> 00:11:42,360
Speaker 1: like we're reaching a new high. We're just rebounding from

195
00:11:42,400 --> 00:11:45,040
Speaker 1: where we were, you know, in the peak of earnings.

196
00:11:45,040 --> 00:11:48,400
Speaker 1: We're twenty twenty two. So it's it's it's just, you know,

197
00:11:48,400 --> 00:11:50,960
Speaker 1: we're not going to get to those levels yet, and

198
00:11:51,000 --> 00:11:52,760
Speaker 1: who knows, you know, how long we'll take to get

199
00:11:52,760 --> 00:11:55,920
Speaker 1: back there, because as many of you remember, rates were

200
00:11:56,000 --> 00:12:00,760
Speaker 1: extremely extremely strong, you know, and so that's kind of

201
00:12:00,800 --> 00:12:03,480
Speaker 1: how we're looking at things when it comes to the

202
00:12:03,480 --> 00:12:08,000
Speaker 1: truckload market. So it's it's pretty pretty positive, I would say.

203
00:12:08,080 --> 00:12:11,680
Speaker 1: And then you know, LTL that's a different breed altogether.

204
00:12:12,559 --> 00:12:16,160
Speaker 1: You know, I mentioned earlier the ism that's telling us

205
00:12:16,240 --> 00:12:20,760
Speaker 1: that you know, demand is not going to be great

206
00:12:20,760 --> 00:12:24,760
Speaker 1: and the foreseeable future tonnage growth is expected to be

207
00:12:24,880 --> 00:12:29,120
Speaker 1: mostly flat next year, but you know, slightly better than

208
00:12:29,160 --> 00:12:31,599
Speaker 1: what it is this year. This year is expected to

209
00:12:31,640 --> 00:12:35,800
Speaker 1: be down about half percent. You know. But you know

210
00:12:36,080 --> 00:12:40,320
Speaker 1: what's really noticeable for the LTL market is that, you know,

211
00:12:40,400 --> 00:12:45,440
Speaker 1: when they do have volume growth, it really throws off

212
00:12:45,480 --> 00:12:50,800
Speaker 1: strong incremental margins and along with pricing, should drive you know,

213
00:12:50,920 --> 00:12:57,080
Speaker 1: overall better margins next year. Consensus expects operating ratios to

214
00:12:57,120 --> 00:12:59,920
Speaker 1: improve out ninety percent for the less than truckload market

215
00:13:00,320 --> 00:13:04,440
Speaker 1: in twenty twenty five. You know, night Swift is expected

216
00:13:04,480 --> 00:13:08,360
Speaker 1: to lead margin improvement next year with over two hundred

217
00:13:08,400 --> 00:13:11,960
Speaker 1: basis points and improvement followed by XBO at about one

218
00:13:12,000 --> 00:13:15,600
Speaker 1: hundred and fifty basis points. You know, XPO is kind

219
00:13:15,640 --> 00:13:17,640
Speaker 1: of like a self help story, if you will. You know,

220
00:13:17,679 --> 00:13:22,360
Speaker 1: they're really focusing on service improvements, pricing, power, productivity, and

221
00:13:22,720 --> 00:13:26,520
Speaker 1: market share games, which should all help their earnings next year.

222
00:13:26,559 --> 00:13:28,880
Speaker 1: At night Swift is really, you know, a company that

223
00:13:29,040 --> 00:13:33,679
Speaker 1: is consolidating a bunch of regional players into a national

224
00:13:33,720 --> 00:13:35,760
Speaker 1: player and you know they're going to get some synergies

225
00:13:35,760 --> 00:13:40,320
Speaker 1: from that, and that's that's kind of driving that. You know,

226
00:13:40,679 --> 00:13:44,120
Speaker 1: when we were looking at rates, we're you know much

227
00:13:44,240 --> 00:13:50,200
Speaker 1: more I guess bullish on the LTL pricing environment. And

228
00:13:50,240 --> 00:13:53,160
Speaker 1: that's really because of the fact that it's such a

229
00:13:53,200 --> 00:13:58,520
Speaker 1: consolidated market. You know, the top ten carriers have something

230
00:13:58,640 --> 00:14:02,200
Speaker 1: like you know, two of the market or it's actually

231
00:14:02,240 --> 00:14:05,360
Speaker 1: probably closer to three quarters of the market now with

232
00:14:05,520 --> 00:14:08,000
Speaker 1: Yellow gone. And then you also have night Swift that

233
00:14:08,160 --> 00:14:11,640
Speaker 1: is consolidating the market. So it's a market that's consolidated.

234
00:14:11,640 --> 00:14:15,760
Speaker 1: It's kind of coming even more consolidated, and you know,

235
00:14:16,080 --> 00:14:21,800
Speaker 1: the market participants really have embraced a disciplined approach and

236
00:14:21,880 --> 00:14:25,360
Speaker 1: a rational approach to pricing, and that should throw off

237
00:14:25,720 --> 00:14:29,000
Speaker 1: you know, in our view, you know, consistent mid single

238
00:14:29,080 --> 00:14:32,880
Speaker 1: digit rate increases. And you know what how we measure

239
00:14:32,960 --> 00:14:35,400
Speaker 1: that when we're when we're doing our models is we're

240
00:14:35,400 --> 00:14:38,160
Speaker 1: looking at revenue per one hundred weight x fuel search charges.

241
00:14:38,240 --> 00:14:41,680
Speaker 1: So you know, we think that can increase, you know,

242
00:14:41,800 --> 00:14:45,360
Speaker 1: for four to seven percent next year depending on the carrier.

243
00:14:45,640 --> 00:14:48,960
Speaker 1: So net, what should this do well in twenty twenty four,

244
00:14:49,040 --> 00:14:52,560
Speaker 1: we saw revenue for the lt L peer group, the

245
00:14:52,600 --> 00:14:55,520
Speaker 1: b I L t L peer group increasing four percent.

246
00:14:55,840 --> 00:15:00,200
Speaker 1: We saw earnings per share mostly flat. Next year, we

247
00:15:00,240 --> 00:15:04,120
Speaker 1: expect revenue growth around five percent, so you know, similar

248
00:15:04,120 --> 00:15:06,840
Speaker 1: to what we'd expect for the truckload market. And then

249
00:15:06,880 --> 00:15:10,480
Speaker 1: we also expect earnings per share to increase around twenty

250
00:15:10,520 --> 00:15:13,440
Speaker 1: two percent. And again those are those are you know,

251
00:15:13,440 --> 00:15:17,320
Speaker 1: when I say expect, those are consensus expectations. So consensus

252
00:15:17,440 --> 00:15:20,000
Speaker 1: is modeling a revenue growth of four point nine percent

253
00:15:20,000 --> 00:15:22,800
Speaker 1: and twenty twenty five and a VPS growth of twenty

254
00:15:22,840 --> 00:15:27,080
Speaker 1: one point five percent of EPs growth in twenty twenty five.

255
00:15:27,120 --> 00:15:31,360
Speaker 1: And that's available on the Bloomberg terminal. So you know,

256
00:15:32,280 --> 00:15:36,440
Speaker 1: while the backdrop is difficult when it comes to tonnage,

257
00:15:36,600 --> 00:15:40,320
Speaker 1: you know, we think that the positivity of rates should

258
00:15:40,600 --> 00:15:44,960
Speaker 1: definitely outperform all of that. So you know that that

259
00:15:45,120 --> 00:15:49,080
Speaker 1: is again, you know, a much better environment next year.

260
00:15:49,400 --> 00:15:51,920
Speaker 1: Then it will be, uh the one we just had,

261
00:15:53,080 --> 00:15:55,360
Speaker 1: you know, one of the interesting things. And I know

262
00:15:55,560 --> 00:15:57,520
Speaker 1: and it can like people like to argue about it.

263
00:15:57,520 --> 00:16:00,640
Speaker 1: Do we have a driver shortage? Is it retention shortage?

264
00:16:00,680 --> 00:16:02,200
Speaker 1: What is it? You know, at the end of the

265
00:16:02,320 --> 00:16:04,680
Speaker 1: end of the day. Uh. You know, trucking companies spend

266
00:16:04,680 --> 00:16:07,240
Speaker 1: a lot of time and money recruiting people and trying

267
00:16:07,240 --> 00:16:10,880
Speaker 1: to keep them in tractors. Uh. It's a very fungible

268
00:16:11,000 --> 00:16:13,600
Speaker 1: job where you know, a truck driver from company A,

269
00:16:14,080 --> 00:16:16,720
Speaker 1: if he's unhappy, he can go to company B, or

270
00:16:16,920 --> 00:16:19,720
Speaker 1: he can try to be an owner operator. So there's

271
00:16:19,760 --> 00:16:23,720
Speaker 1: a lot of turnover in the industry, especially uh that

272
00:16:23,840 --> 00:16:26,680
Speaker 1: first year that somebody enters the industry, because they come

273
00:16:26,720 --> 00:16:28,880
Speaker 1: in and you know, they might want to be like

274
00:16:29,560 --> 00:16:33,680
Speaker 1: you know, they might choose trucking as maybe a second career, uh,

275
00:16:33,720 --> 00:16:36,520
Speaker 1: and then you know, maybe doesn't meet their expectations because

276
00:16:36,640 --> 00:16:40,320
Speaker 1: you know, it is a very demanding job. And with that,

277
00:16:40,480 --> 00:16:42,440
Speaker 1: you know, I thank you for all those truckers out

278
00:16:42,440 --> 00:16:44,480
Speaker 1: there that do what you do, because you know, you

279
00:16:44,560 --> 00:16:48,480
Speaker 1: are essential to the economy. Uh, and not only essential

280
00:16:48,520 --> 00:16:51,520
Speaker 1: to the economy, but you're essential to every person's life

281
00:16:51,520 --> 00:16:53,760
Speaker 1: because you know, everything you get in your house, whether

282
00:16:53,800 --> 00:16:57,880
Speaker 1: it's food or a sofa, will come come to via truck.

283
00:16:57,960 --> 00:17:02,280
Speaker 1: So thank you for those drivers out there. That being said,

284
00:17:02,760 --> 00:17:06,760
Speaker 1: you know, if we have a kind of tougher stance

285
00:17:06,800 --> 00:17:10,879
Speaker 1: on immigration, the labor market will remain tight, and a

286
00:17:10,960 --> 00:17:15,879
Speaker 1: tighter market, drivers do have options. They could either you know,

287
00:17:15,960 --> 00:17:20,640
Speaker 1: go into a different industry, whether it's construction, manufacturing, warehousing,

288
00:17:21,720 --> 00:17:24,600
Speaker 1: you know, because maybe they're rather have a better work

289
00:17:24,600 --> 00:17:27,879
Speaker 1: life balance where they're home more often, or they're you know,

290
00:17:27,920 --> 00:17:32,080
Speaker 1: they have more reliability in their you know, scheduling, so

291
00:17:32,280 --> 00:17:34,280
Speaker 1: you know, they they know where they can be and

292
00:17:34,560 --> 00:17:36,800
Speaker 1: when they can be. So you know, you could see

293
00:17:37,240 --> 00:17:40,719
Speaker 1: a driver I'm not gonna call it shortage because some

294
00:17:40,800 --> 00:17:42,919
Speaker 1: of my friends out there might make fun of me,

295
00:17:43,200 --> 00:17:46,040
Speaker 1: but you know, definitely it's going to be tougher to

296
00:17:46,119 --> 00:17:49,080
Speaker 1: get drivers in the seats, and that could be inflationary

297
00:17:49,119 --> 00:17:51,200
Speaker 1: for trucking companies because you know, one way to get

298
00:17:51,240 --> 00:17:53,760
Speaker 1: people to drive for you is to pay them more.

299
00:17:54,160 --> 00:17:57,040
Speaker 1: So you know, we could see a driver pay increase

300
00:17:57,160 --> 00:17:59,919
Speaker 1: next year given the fact that you know, we do

301
00:18:00,160 --> 00:18:03,360
Speaker 1: expect a tighter market, you know, and also there are

302
00:18:04,000 --> 00:18:08,200
Speaker 1: you know, higher standards for drivers. You know, you have

303
00:18:09,920 --> 00:18:13,240
Speaker 1: you know, not only the alcohol and drug clearing house,

304
00:18:13,800 --> 00:18:17,600
Speaker 1: you have increased use of hair follicle testing, and then

305
00:18:17,640 --> 00:18:21,359
Speaker 1: you also have demographics which kind of could limit the

306
00:18:21,440 --> 00:18:25,800
Speaker 1: availability with safe qualified drivers over the long term. So

307
00:18:26,200 --> 00:18:27,800
Speaker 1: you know, while we don't think we're going to be

308
00:18:27,800 --> 00:18:30,679
Speaker 1: in a place where, you know, it's going to be

309
00:18:30,680 --> 00:18:33,760
Speaker 1: extremely difficult to find drivers, I think next year it's

310
00:18:34,160 --> 00:18:38,520
Speaker 1: going to be incrementally harder to attract and retain drivers.

311
00:18:38,680 --> 00:18:42,160
Speaker 1: And then also, you know, there are new regulations coming out.

312
00:18:42,720 --> 00:18:47,520
Speaker 1: The EPA passed more stringent nitrogen oxide rules that will

313
00:18:47,520 --> 00:18:51,679
Speaker 1: go into effect for trucks in twenty twenty seven. The

314
00:18:51,760 --> 00:18:56,359
Speaker 1: costs for those are really unknown some industry participants I

315
00:18:56,480 --> 00:18:59,040
Speaker 1: think it could be twenty to thirty thousand dollars more

316
00:18:59,760 --> 00:19:03,400
Speaker 1: for new truck, which obviously is not a chicken scratch

317
00:19:04,280 --> 00:19:08,320
Speaker 1: and could make trucks much more expensive. And then so

318
00:19:08,400 --> 00:19:10,679
Speaker 1: we could see you know, a huge pre buy of

319
00:19:10,880 --> 00:19:14,720
Speaker 1: equipment in twenty twenty six. So something maybe not to

320
00:19:14,760 --> 00:19:16,920
Speaker 1: think about so much in twenty twenty five, but put

321
00:19:17,000 --> 00:19:19,000
Speaker 1: on your radar in twenty twenty six when we're talking

322
00:19:19,040 --> 00:19:22,720
Speaker 1: about you know, supply demand as it relates to the

323
00:19:22,760 --> 00:19:28,000
Speaker 1: overall trucking industry. So you know, that's kind of like

324
00:19:28,080 --> 00:19:31,720
Speaker 1: our kind of broad take on the trucking markets. You know,

325
00:19:31,760 --> 00:19:35,800
Speaker 1: when we're looking at the rail industry, the rail industry

326
00:19:36,960 --> 00:19:40,840
Speaker 1: is you know, has always been a less violatile industry.

327
00:19:41,200 --> 00:19:45,920
Speaker 1: They've been having a couple of tough years all in all,

328
00:19:45,960 --> 00:19:47,720
Speaker 1: but you know, we just think that they're going to

329
00:19:47,800 --> 00:19:51,680
Speaker 1: start delivering growth in twenty twenty five. When it comes

330
00:19:51,720 --> 00:19:55,800
Speaker 1: to volume, you know, analysts the total volume for publicly

331
00:19:55,840 --> 00:19:59,400
Speaker 1: traded class one rails to increase by just under three

332
00:19:59,400 --> 00:20:02,439
Speaker 1: percent next this year, which is about fifty basis points

333
00:20:02,480 --> 00:20:07,160
Speaker 1: more than last year. And so you know, Canadian Pacific

334
00:20:07,840 --> 00:20:11,440
Speaker 1: Kansas City is expected to lead that up six and

335
00:20:11,480 --> 00:20:15,920
Speaker 1: a half percent, followed by its other Canadian peer, Canadian National,

336
00:20:15,960 --> 00:20:19,639
Speaker 1: which is expected to see volume increase around five percent

337
00:20:19,760 --> 00:20:23,000
Speaker 1: higher next year. And that's those are consensus expectations. A

338
00:20:23,040 --> 00:20:28,080
Speaker 1: lot of that on the case, the CPKC is really

339
00:20:28,119 --> 00:20:31,040
Speaker 1: being driven by the fact of this you know, new

340
00:20:31,200 --> 00:20:37,399
Speaker 1: service that they have following the merger last year, and

341
00:20:37,440 --> 00:20:39,480
Speaker 1: so you know that's going to drive a lot of

342
00:20:39,560 --> 00:20:44,200
Speaker 1: volumes cross border volumes between Mexico and the US. Again,

343
00:20:44,320 --> 00:20:47,040
Speaker 1: we don't know what the Trump administration's tariffs policies are

344
00:20:47,080 --> 00:20:52,040
Speaker 1: going to be, and that's probably the biggest risk to

345
00:20:52,119 --> 00:20:57,040
Speaker 1: demand for not only CPKC, but you know, all rails

346
00:20:57,080 --> 00:21:00,399
Speaker 1: because they all do benefit from from global trade. You know,

347
00:21:00,440 --> 00:21:03,720
Speaker 1: whether it's stuff coming in from the ports or cross

348
00:21:03,760 --> 00:21:06,840
Speaker 1: border with our neighbors to the north or the south.

349
00:21:07,840 --> 00:21:10,920
Speaker 1: You know, intermodal, which is you know, more aligned with trucking.

350
00:21:11,280 --> 00:21:14,080
Speaker 1: You know, intermodial growth in the US may moderate to

351
00:21:14,359 --> 00:21:17,399
Speaker 1: around three point one percent next year from six point

352
00:21:17,480 --> 00:21:21,199
Speaker 1: four percent this year, and that's based on FDR's forecast.

353
00:21:21,640 --> 00:21:26,480
Speaker 1: Consensus expects a three point seven increase in intermodal median

354
00:21:26,600 --> 00:21:29,680
Speaker 1: growth for the public Class one peers in twenty twenty five,

355
00:21:30,440 --> 00:21:33,240
Speaker 1: and again Canadian rails are expected to outpace the US

356
00:21:33,400 --> 00:21:37,800
Speaker 1: rivals do impart easier comparisons from this year's strikes and wildfires.

357
00:21:39,080 --> 00:21:42,480
Speaker 1: You know, domestic intermodal should benefit from a tighter trucking

358
00:21:42,520 --> 00:21:45,960
Speaker 1: market in twenty twenty five, which we outlined earlier, which

359
00:21:46,000 --> 00:21:49,639
Speaker 1: along with improved service, should make rails more competitive to

360
00:21:49,720 --> 00:21:54,240
Speaker 1: win traffic from the highways. Something you know, during when

361
00:21:54,280 --> 00:21:57,199
Speaker 1: when when when, when the market was very tight in

362
00:21:57,280 --> 00:22:00,639
Speaker 1: twenty one twenty twenty two, they really kind of dropped

363
00:22:00,680 --> 00:22:03,800
Speaker 1: the ball because service really wasn't where it should be.

364
00:22:03,920 --> 00:22:07,280
Speaker 1: So you know, maybe during this trucking cycle they'll be

365
00:22:07,320 --> 00:22:12,919
Speaker 1: able to take more share from from the roads. And

366
00:22:12,960 --> 00:22:16,159
Speaker 1: what's really interesting in the rails right now is that

367
00:22:16,200 --> 00:22:20,520
Speaker 1: they're very, very very active in courting new business to

368
00:22:20,600 --> 00:22:23,760
Speaker 1: kind of spur growth beyond you know, what the economy

369
00:22:23,800 --> 00:22:27,520
Speaker 1: is going to provide. So for example, CSX, you know

370
00:22:27,640 --> 00:22:30,919
Speaker 1: their analyst day that they had recently, management highlighted a

371
00:22:30,960 --> 00:22:34,080
Speaker 1: pipeline around five hundred and forty new customer sites or

372
00:22:34,119 --> 00:22:39,000
Speaker 1: expansion projects with current shippers that could drive up to

373
00:22:39,080 --> 00:22:43,200
Speaker 1: three hundred thousand additional car loads or around eleven percent

374
00:22:43,320 --> 00:22:46,000
Speaker 1: over twenty twenty four volumes. So you know, this is

375
00:22:46,280 --> 00:22:49,840
Speaker 1: pretty important to them. So you know, the kind of

376
00:22:49,960 --> 00:22:54,480
Speaker 1: long term secular near shoring or on shoring trend will

377
00:22:54,520 --> 00:22:56,800
Speaker 1: benefit the rails, but you know, we're not going to

378
00:22:56,800 --> 00:22:58,840
Speaker 1: see a huge spike in demand. It's going to be

379
00:22:59,160 --> 00:23:04,200
Speaker 1: just an incremental positive for the industry and for them

380
00:23:04,200 --> 00:23:07,399
Speaker 1: to win business and wind share. It's really you know,

381
00:23:07,520 --> 00:23:11,160
Speaker 1: obviously it helps where you're located, but it's also about

382
00:23:11,200 --> 00:23:15,239
Speaker 1: you know, service and network fluidity. You know, we were

383
00:23:15,280 --> 00:23:18,880
Speaker 1: talking about earlier US rails. You know, they furloughed too

384
00:23:18,920 --> 00:23:23,120
Speaker 1: many workers when the pandemic began, and they're really caught

385
00:23:23,160 --> 00:23:26,919
Speaker 1: flat footed when demand returned faster than expected, and the

386
00:23:27,040 --> 00:23:30,159
Speaker 1: end result was just really poor service and missed opportunities.

387
00:23:31,040 --> 00:23:34,200
Speaker 1: And so you know, today the trukking market remains loose,

388
00:23:35,080 --> 00:23:39,480
Speaker 1: which provides fewer openings for share gains. And also, you

389
00:23:39,480 --> 00:23:43,760
Speaker 1: know oil is not very high right now, so you know,

390
00:23:43,880 --> 00:23:49,400
Speaker 1: lower oil prices or fuel prices will make the savings

391
00:23:49,560 --> 00:23:53,879
Speaker 1: from intermodal less of a motivation because that dollar amount

392
00:23:53,920 --> 00:23:57,000
Speaker 1: will be less. The percentage a discount might be the same,

393
00:23:57,040 --> 00:24:00,240
Speaker 1: but that dollar amount might not be as much. Where

394
00:24:00,359 --> 00:24:02,040
Speaker 1: you know, at the end of the day, a truck

395
00:24:02,080 --> 00:24:05,000
Speaker 1: will be able to provide a better service because you know,

396
00:24:05,000 --> 00:24:07,680
Speaker 1: your freate's being touched less and it's you know, they're

397
00:24:07,720 --> 00:24:09,600
Speaker 1: able to pick up at a door and drop off

398
00:24:09,640 --> 00:24:12,720
Speaker 1: at a door. You know, for those that don't need

399
00:24:12,760 --> 00:24:17,359
Speaker 1: that kind of service, rail is a great viable option. Uh.

400
00:24:17,440 --> 00:24:22,119
Speaker 1: And as rails get better at their own network fluidity,

401
00:24:23,160 --> 00:24:26,239
Speaker 1: they can become more much more compelling, you know. And

402
00:24:26,280 --> 00:24:29,800
Speaker 1: so what we're looking at the rails again, you know

403
00:24:29,880 --> 00:24:34,199
Speaker 1: it's it's it's mid single digit revenue growth. You know,

404
00:24:34,359 --> 00:24:39,160
Speaker 1: earnings growth around twelve percent, so you know, expectations are

405
00:24:39,240 --> 00:24:41,840
Speaker 1: for their earnings to grow a lot less than the

406
00:24:42,760 --> 00:24:45,439
Speaker 1: twenty one two percent. You know, we talked about for

407
00:24:45,480 --> 00:24:48,240
Speaker 1: the LTL carriers and the sixty seven percent, and we

408
00:24:48,240 --> 00:24:51,280
Speaker 1: talked about the truckload carriers. So you know, next year

409
00:24:51,359 --> 00:24:54,600
Speaker 1: net net for the railroads is going to be a

410
00:24:54,600 --> 00:24:56,920
Speaker 1: better year. A lot of it's going to be dependent

411
00:24:57,400 --> 00:25:02,280
Speaker 1: on their ability to provide a good, consistent, safe service.

412
00:25:02,880 --> 00:25:06,960
Speaker 1: There's a lot of interesting stories within the rail industry

413
00:25:07,720 --> 00:25:11,160
Speaker 1: that make you know, each kind of story very unique.

414
00:25:11,280 --> 00:25:14,720
Speaker 1: Whether it's you know, as we mentioned CPKC, you know

415
00:25:14,840 --> 00:25:20,960
Speaker 1: that that really interesting network where connects Canada, the US

416
00:25:21,040 --> 00:25:25,320
Speaker 1: and Mexico with one single line. Then you also have

417
00:25:25,560 --> 00:25:29,199
Speaker 1: you know, someone like Norfolk Southern who was dealing with uh,

418
00:25:29,520 --> 00:25:32,560
Speaker 1: you know, a tragic derailment a couple of years ago,

419
00:25:33,640 --> 00:25:38,720
Speaker 1: an activists and then you know the CEO being fired

420
00:25:39,400 --> 00:25:41,520
Speaker 1: and now you know they're they're kind of focused on

421
00:25:41,960 --> 00:25:45,280
Speaker 1: operating a better, more profitable railroad. So there's a lot

422
00:25:45,320 --> 00:25:51,479
Speaker 1: of interesting stories within the overall rail rail market. So

423
00:25:51,560 --> 00:25:55,440
Speaker 1: that concludes our outlook for the trucking and railroad markets

424
00:25:55,440 --> 00:25:58,600
Speaker 1: for twenty twenty five. You know, it's really we provided

425
00:25:58,640 --> 00:26:00,920
Speaker 1: you a real high level. If you really want to

426
00:26:00,920 --> 00:26:05,280
Speaker 1: get more into the weeds, please feel free to reach out.

427
00:26:05,359 --> 00:26:07,879
Speaker 1: And you know, again whether it's on the Bloomberg terminal

428
00:26:07,960 --> 00:26:10,520
Speaker 1: or on social media, happy to have a conversation with

429
00:26:10,560 --> 00:26:14,600
Speaker 1: you about our outlook. Further, Also, I want to note

430
00:26:14,640 --> 00:26:18,960
Speaker 1: that this episode marks are a sixty second episode and

431
00:26:19,040 --> 00:26:21,439
Speaker 1: I can't tell you how much fun it's been to

432
00:26:21,440 --> 00:26:23,919
Speaker 1: have the opportunity to speak with so many insightful and

433
00:26:23,920 --> 00:26:27,800
Speaker 1: interesting people that are driving supply chains, and I'm looking

434
00:26:27,840 --> 00:26:30,840
Speaker 1: forward to bringing more great guests onto the podcast in

435
00:26:30,840 --> 00:26:33,600
Speaker 1: twenty twenty five. I also want to thank you for

436
00:26:33,680 --> 00:26:37,520
Speaker 1: tuning in. I'm touched by all the positive feedback, whether

437
00:26:37,560 --> 00:26:40,280
Speaker 1: it's online or you know, when I run into people

438
00:26:40,320 --> 00:26:44,720
Speaker 1: at conferences. It's been a great ride for me. It's

439
00:26:44,760 --> 00:26:49,320
Speaker 1: really been fun to do and again the conversations I've

440
00:26:49,359 --> 00:26:51,720
Speaker 1: really truly enjoyed. So I also want to thank all

441
00:26:52,080 --> 00:26:55,240
Speaker 1: the guests that have come on prior for your time

442
00:26:55,520 --> 00:26:58,960
Speaker 1: and your insights, you know, and also I'd love to

443
00:26:59,000 --> 00:27:01,359
Speaker 1: hear from you our listensteners, so you know, if you

444
00:27:01,480 --> 00:27:04,480
Speaker 1: like the podcast, please subscribe and leave a review. And

445
00:27:04,520 --> 00:27:07,800
Speaker 1: if you want to learn more about the freight transportation markets,

446
00:27:08,000 --> 00:27:10,480
Speaker 1: check out our work on the Bloomberg terminal at BIG

447
00:27:11,640 --> 00:27:15,400
Speaker 1: and you can see some of our stuff on social media. Also, finally,

448
00:27:15,520 --> 00:27:18,400
Speaker 1: I want to wish you all a very happy holiday

449
00:27:18,480 --> 00:27:22,640
Speaker 1: season and very happy healthy twenty twenty five. Thanks everyone,

450
00:27:22,880 --> 00:27:23,520
Speaker 1: and take care