1 00:00:07,680 --> 00:00:11,080 Speaker 1: Hired one and welcome to Bloomberg Intelligence Talking Transports podcast. 2 00:00:11,160 --> 00:00:14,280 Speaker 1: I'm your host Lee Klaskow, Senior Freight, transportation and Logistics 3 00:00:14,280 --> 00:00:18,120 Speaker 1: analyst at Bloomberg Intelligence, Bloomberg's in house research arm. We're 4 00:00:18,200 --> 00:00:20,360 Speaker 1: happy to have with us on the podcast Today with 5 00:00:20,680 --> 00:00:24,200 Speaker 1: Chris Weatherby. He is a managing director and lead analyst 6 00:00:24,440 --> 00:00:27,360 Speaker 1: on air freight, surface and marine transportation. Has been a 7 00:00:27,400 --> 00:00:31,000 Speaker 1: senior analyst with City Research since twenty ten. He covers 8 00:00:31,040 --> 00:00:34,560 Speaker 1: transportation and shipping since two thousand and five, and prior 9 00:00:34,640 --> 00:00:37,879 Speaker 1: to joining City, Chris was a senior transportation analyst at 10 00:00:38,040 --> 00:00:41,560 Speaker 1: FBR Capital Markets, which he joined following a ten year 11 00:00:41,600 --> 00:00:44,320 Speaker 1: career at Merrill Lynch, including the last five as a 12 00:00:44,360 --> 00:00:47,640 Speaker 1: publishing analyst on the highly ranked Bank of America Merrill 13 00:00:47,720 --> 00:00:52,559 Speaker 1: Linch equity research team covering this industrial sector. Chris is 14 00:00:52,600 --> 00:00:56,880 Speaker 1: also an I ranked analyst over at City. He received 15 00:00:56,880 --> 00:00:59,920 Speaker 1: a BA from the University of Maryland and completed his 16 00:01:00,080 --> 00:01:03,280 Speaker 1: dual focus MBA degree in Finance and Accounting with honors 17 00:01:03,320 --> 00:01:07,320 Speaker 1: at Fordham University with an MBA. So I guess go 18 00:01:07,319 --> 00:01:10,000 Speaker 1: go rams there at Fordham. Thanks for joining us on 19 00:01:10,040 --> 00:01:11,240 Speaker 1: the podcast, Chris. 20 00:01:11,280 --> 00:01:12,679 Speaker 2: Thanks for having me. Lee it's great to be with 21 00:01:12,720 --> 00:01:13,240 Speaker 2: you as always. 22 00:01:13,480 --> 00:01:15,679 Speaker 1: And Chris, I didn't mention this in your bio, but 23 00:01:15,760 --> 00:01:18,680 Speaker 1: you have the distinction as actually being my first repeat 24 00:01:18,720 --> 00:01:22,640 Speaker 1: guest on Talking Transports podcast. So congratulations on that great honor. 25 00:01:23,360 --> 00:01:25,880 Speaker 2: That is a fantastic honor, and I'm always happy to 26 00:01:25,920 --> 00:01:27,520 Speaker 2: join you. It's always fun to chat with you, as 27 00:01:27,520 --> 00:01:27,720 Speaker 2: you know. 28 00:01:28,000 --> 00:01:30,640 Speaker 1: Yeah, so I wanted to bring you on again because 29 00:01:30,840 --> 00:01:33,360 Speaker 1: last week, you guys, I want to say you guys. 30 00:01:33,400 --> 00:01:37,160 Speaker 1: City held their industrial conference down in Miami. I was 31 00:01:37,240 --> 00:01:39,840 Speaker 1: fortunate enough to be able to go down there and 32 00:01:39,840 --> 00:01:42,800 Speaker 1: get away from the northeast weather, and I wanted to 33 00:01:42,800 --> 00:01:45,200 Speaker 1: hear your takeaways from that because you had the opportunity 34 00:01:45,200 --> 00:01:47,680 Speaker 1: to speak to a lot of companies and a lot 35 00:01:47,720 --> 00:01:51,720 Speaker 1: of investors. So, you know, I just to that what 36 00:01:51,760 --> 00:01:54,640 Speaker 1: were the kind of biggest takeaways from the conference in 37 00:01:54,720 --> 00:01:55,640 Speaker 1: Miami last week. 38 00:01:55,840 --> 00:01:58,000 Speaker 2: Yeah, and we were really glad to have you down there, Lisa, 39 00:01:58,000 --> 00:02:01,040 Speaker 2: thanks for joining us, and thanks everybody else who listens 40 00:02:01,040 --> 00:02:02,840 Speaker 2: to this podcast who is able to join us down 41 00:02:02,880 --> 00:02:05,760 Speaker 2: in Miami. It was a really good few days down 42 00:02:05,800 --> 00:02:08,880 Speaker 2: at South Beach. We had over five hundred investors join 43 00:02:09,000 --> 00:02:10,400 Speaker 2: us over the course of the three and a half 44 00:02:10,440 --> 00:02:11,840 Speaker 2: days that we were down there, and we had a 45 00:02:11,919 --> 00:02:14,240 Speaker 2: number of companies. I think we were north of one 46 00:02:14,320 --> 00:02:16,600 Speaker 2: hundred and fifty companies this year. So this conference is 47 00:02:16,639 --> 00:02:18,920 Speaker 2: something we've been building, has become a flagship event for 48 00:02:18,960 --> 00:02:21,639 Speaker 2: city research. So we were super proud to put that on, 49 00:02:21,840 --> 00:02:23,800 Speaker 2: and we've got a lot of great feedback, and so 50 00:02:23,919 --> 00:02:26,640 Speaker 2: it was. It was a good few days. And so 51 00:02:26,880 --> 00:02:29,920 Speaker 2: I think the keys that we generally heard from the 52 00:02:29,960 --> 00:02:32,120 Speaker 2: Transport Group, and I sat in on a lot of 53 00:02:32,160 --> 00:02:36,000 Speaker 2: other industrial presentations and fireside chats as well, was that, 54 00:02:36,400 --> 00:02:39,200 Speaker 2: you know, the cycle is probably turning to a degree 55 00:02:39,240 --> 00:02:41,440 Speaker 2: for freight, So we are, you know, I think in 56 00:02:41,480 --> 00:02:44,760 Speaker 2: some of the early cycle and markets like intermodal, like 57 00:02:44,880 --> 00:02:48,239 Speaker 2: truck load kind of bouncing along the bottom. February hasn't 58 00:02:48,280 --> 00:02:51,080 Speaker 2: been a particularly great month for freight, coming off of 59 00:02:51,080 --> 00:02:54,280 Speaker 2: what was a stronger December and January, but there are 60 00:02:54,480 --> 00:02:57,120 Speaker 2: signals that the cycle is turning. And as we look 61 00:02:57,160 --> 00:02:59,760 Speaker 2: out over twenty twenty four, I think generally speaking, there 62 00:02:59,800 --> 00:03:02,400 Speaker 2: was a degree of cautious optimism, which is a phrase 63 00:03:02,440 --> 00:03:04,320 Speaker 2: you hear all the time, but I do think it's true. 64 00:03:04,400 --> 00:03:06,760 Speaker 2: Here is a lot of the indicators are pointing to 65 00:03:06,840 --> 00:03:09,040 Speaker 2: a better second half of the year, and I think 66 00:03:09,080 --> 00:03:11,480 Speaker 2: companies were trying to help us understand that a little 67 00:03:11,480 --> 00:03:11,880 Speaker 2: bit better. 68 00:03:12,560 --> 00:03:14,560 Speaker 1: Yeah, on the intermodal front, you know, I know JB 69 00:03:14,720 --> 00:03:19,680 Speaker 1: Hunt had mentioned about pricing. Can you talk about their 70 00:03:19,800 --> 00:03:24,280 Speaker 1: comments on intermotive pricing and maybe the read through for truckload. 71 00:03:25,440 --> 00:03:28,400 Speaker 2: Yeah, absolutely, so. I think JB Hunt was with us 72 00:03:28,440 --> 00:03:31,160 Speaker 2: on Tuesday to kick off the conference early in the morning, 73 00:03:31,200 --> 00:03:33,200 Speaker 2: and I think they did make a little bit of 74 00:03:33,240 --> 00:03:35,640 Speaker 2: news in some of the comments that they provided. So 75 00:03:36,080 --> 00:03:38,360 Speaker 2: Kelly Simpson, who's the president of the company, was joining 76 00:03:38,440 --> 00:03:40,600 Speaker 2: us for a fireside chat and she mentioned that through 77 00:03:40,640 --> 00:03:44,839 Speaker 2: the first twenty percent of their intermodal bid season, they 78 00:03:44,960 --> 00:03:49,000 Speaker 2: were surprised by the degree of competitiveness in that process. 79 00:03:49,040 --> 00:03:52,040 Speaker 2: So what I think she was meaning was that there 80 00:03:52,240 --> 00:03:55,360 Speaker 2: was a degree of price competition that was somewhat unexpected 81 00:03:55,440 --> 00:03:58,720 Speaker 2: as other carriers were looking to try to push back 82 00:03:58,760 --> 00:04:00,600 Speaker 2: I think a little bit on some of the market 83 00:04:00,640 --> 00:04:03,320 Speaker 2: share gains that JB Hunt has been able to win 84 00:04:03,480 --> 00:04:06,040 Speaker 2: in the intermodal side. So that was the sort of 85 00:04:06,080 --> 00:04:08,720 Speaker 2: the earlier in the earliest indicator we had at the 86 00:04:08,760 --> 00:04:11,560 Speaker 2: conference that you know, what we were seeing in February 87 00:04:11,760 --> 00:04:14,119 Speaker 2: was that things were a little bit softer and we're 88 00:04:14,160 --> 00:04:16,640 Speaker 2: not necessarily out of the woods yet, so generally speaking, 89 00:04:16,839 --> 00:04:19,919 Speaker 2: probably a degree of price competition going on in the 90 00:04:19,960 --> 00:04:22,599 Speaker 2: intermodial market. According to JB. Hunt. 91 00:04:22,839 --> 00:04:27,080 Speaker 1: Yeah, so that price competition for share, meaning lower prices. 92 00:04:27,120 --> 00:04:29,880 Speaker 1: And when you say other carriers, I'm assuming you're talking 93 00:04:29,880 --> 00:04:33,160 Speaker 1: about the intermodial marketing companies, the imcs, like the hub 94 00:04:33,200 --> 00:04:36,720 Speaker 1: groups and Schneiders of the world in terms of competition. 95 00:04:36,839 --> 00:04:38,839 Speaker 2: That's ours, that's our sense. I mean, you know, Shelley 96 00:04:38,839 --> 00:04:40,839 Speaker 2: didn't want to be overly specific. I think she was 97 00:04:40,880 --> 00:04:44,200 Speaker 2: trying to be relatively diplomatic about what she was seeing 98 00:04:44,200 --> 00:04:46,320 Speaker 2: in some name names. But I think that's probably a 99 00:04:46,320 --> 00:04:48,360 Speaker 2: fair assumption, right, those are the folks that they're going 100 00:04:48,400 --> 00:04:51,400 Speaker 2: to be squaring off with through that bid process, and 101 00:04:51,400 --> 00:04:53,400 Speaker 2: I think it's important, right, And to some degree, there's 102 00:04:53,440 --> 00:04:55,920 Speaker 2: probably a sense that she was sending a message, you're 103 00:04:55,920 --> 00:04:58,440 Speaker 2: only twenty percent of the way through this process, right, 104 00:04:58,480 --> 00:05:00,560 Speaker 2: You're going to take the rest of the ag kind 105 00:05:00,600 --> 00:05:02,640 Speaker 2: of happens over the course of the next few months, 106 00:05:02,760 --> 00:05:05,240 Speaker 2: ending around mid year, and in the second half of 107 00:05:05,240 --> 00:05:07,279 Speaker 2: the year, all of these bids are put into work. 108 00:05:07,360 --> 00:05:10,120 Speaker 2: But I think the indication was, hey, you know, we 109 00:05:10,160 --> 00:05:12,200 Speaker 2: don't like what we're seeing so far, and it's really 110 00:05:12,200 --> 00:05:14,520 Speaker 2: coming from some of those other imcs out there. 111 00:05:15,320 --> 00:05:17,039 Speaker 1: And did you get the sense at all what that 112 00:05:17,120 --> 00:05:19,279 Speaker 1: actually means. Does that mean like we're going to see 113 00:05:19,400 --> 00:05:24,400 Speaker 1: mid single digit declines, low single digit declines, flat pricing. 114 00:05:24,760 --> 00:05:29,719 Speaker 1: Do you have any indication of what increased competition means? 115 00:05:30,800 --> 00:05:35,240 Speaker 2: Well, the reality is we don't know specifically, and I 116 00:05:35,240 --> 00:05:38,400 Speaker 2: don't think Hunt necessarily elaborated a lot more than what 117 00:05:38,480 --> 00:05:41,160 Speaker 2: I just articulated. I think also the fact that we're 118 00:05:41,160 --> 00:05:43,560 Speaker 2: only a fifth of the way through the process means 119 00:05:43,600 --> 00:05:46,120 Speaker 2: that we're not really exactly sure what's happening here in 120 00:05:46,160 --> 00:05:48,080 Speaker 2: the near term and how that ultimately will play out 121 00:05:48,120 --> 00:05:49,679 Speaker 2: over the course of the rest of the bid season 122 00:05:49,680 --> 00:05:52,440 Speaker 2: in terms of actual numbers. I think, you know, the 123 00:05:52,480 --> 00:05:55,839 Speaker 2: way we're thinking about this is it was at least 124 00:05:55,839 --> 00:05:58,360 Speaker 2: a little bit of a warning signal to the street 125 00:05:58,440 --> 00:06:01,039 Speaker 2: to suggest that, hey, you know, we're kind of bouncing 126 00:06:01,080 --> 00:06:04,200 Speaker 2: along the bottom at high single digit intermodial margins at 127 00:06:04,200 --> 00:06:07,040 Speaker 2: a company like JB. Hunt, and there is an expectation 128 00:06:07,560 --> 00:06:10,440 Speaker 2: for a ramp up into something closer to double digits 129 00:06:10,720 --> 00:06:13,279 Speaker 2: by the end of the year, and my sense was 130 00:06:13,320 --> 00:06:16,040 Speaker 2: it was a feeling and hey, don't expect that ramp 131 00:06:16,120 --> 00:06:19,400 Speaker 2: to maybe be quite as steep as people are assuming today. 132 00:06:19,440 --> 00:06:21,080 Speaker 2: And that was really what we took out of it. It 133 00:06:21,040 --> 00:06:23,560 Speaker 2: should be a little be careful with your expectations of 134 00:06:23,600 --> 00:06:26,560 Speaker 2: this recovery that everyone's baking into their models for the 135 00:06:26,600 --> 00:06:28,599 Speaker 2: second half of the year. It could come, but it 136 00:06:28,640 --> 00:06:31,440 Speaker 2: may not necessarily come quite as quickly as people are expecting. 137 00:06:31,600 --> 00:06:33,520 Speaker 1: Did you guys have to tweak your twenty twenty four 138 00:06:33,640 --> 00:06:36,040 Speaker 1: estimates for jbehunt following the conference? 139 00:06:36,880 --> 00:06:38,960 Speaker 2: We have not moved our numbers. I think there's other 140 00:06:39,040 --> 00:06:41,280 Speaker 2: things that have the potential to offset and what I 141 00:06:41,279 --> 00:06:44,039 Speaker 2: guess I would also highlight a point that they made 142 00:06:44,320 --> 00:06:48,200 Speaker 2: was that not necessarily to translate some of the really 143 00:06:48,240 --> 00:06:54,239 Speaker 2: strong inbound loaded container volume data directly into their intermodial loads. 144 00:06:54,320 --> 00:06:56,760 Speaker 2: But I think it's probably fair to say that the 145 00:06:56,880 --> 00:07:01,080 Speaker 2: overall volume activity for a company JB Hunt through the 146 00:07:01,080 --> 00:07:04,240 Speaker 2: first part of the year is pretty good. So I 147 00:07:04,240 --> 00:07:06,360 Speaker 2: don't think it's all bad when you think about what's 148 00:07:06,400 --> 00:07:09,600 Speaker 2: going on there. I think they're having some degree of success, 149 00:07:09,640 --> 00:07:12,760 Speaker 2: still capturing some market share, and they also I think 150 00:07:12,800 --> 00:07:15,800 Speaker 2: broadly speaking, are benefiting from what we're seeing in terms 151 00:07:15,840 --> 00:07:18,119 Speaker 2: of inbound loaded containers to the ports kind of across 152 00:07:18,160 --> 00:07:19,400 Speaker 2: the country, which have been quite strong. 153 00:07:19,720 --> 00:07:22,440 Speaker 1: Yeah. So JB Hunts are really interesting company. You know, 154 00:07:22,480 --> 00:07:24,920 Speaker 1: they have a lot of different businesses, whether it's dedicated 155 00:07:25,240 --> 00:07:29,960 Speaker 1: over the road, trucking, brokerage, final mile. Were there any 156 00:07:30,000 --> 00:07:34,840 Speaker 1: other kind of nuggets to take away from Shelley's comments 157 00:07:34,920 --> 00:07:36,120 Speaker 1: during the conference. 158 00:07:36,520 --> 00:07:39,400 Speaker 2: Yeah, I think. You know, Brad Hicks was also there 159 00:07:39,440 --> 00:07:42,440 Speaker 2: and he runs the highway services business for JB. Hunt 160 00:07:42,440 --> 00:07:45,800 Speaker 2: and he had noted that through bid season, while truckload 161 00:07:45,880 --> 00:07:47,880 Speaker 2: looked kind of similar to the comments that they had 162 00:07:47,920 --> 00:07:51,320 Speaker 2: made on the intermodal side, that brokerage was maybe a 163 00:07:51,400 --> 00:07:53,480 Speaker 2: little bit better, or maybe the right way to phrase 164 00:07:53,480 --> 00:07:55,280 Speaker 2: it is a little less worse, I think is probably 165 00:07:55,280 --> 00:07:57,800 Speaker 2: the right way to think about it. And that was 166 00:07:57,920 --> 00:08:01,120 Speaker 2: a somewhat encouraging again, kind of taking a step back 167 00:08:01,160 --> 00:08:03,440 Speaker 2: to my previous comments about the fact that it feels 168 00:08:03,440 --> 00:08:05,520 Speaker 2: like the cycle is turning. There's a lot of indicators 169 00:08:05,520 --> 00:08:08,160 Speaker 2: that would point to strength to come as we move 170 00:08:08,200 --> 00:08:12,160 Speaker 2: through the rest of twenty twenty four. Brokerage typically is 171 00:08:12,320 --> 00:08:14,960 Speaker 2: an early indicator because a lot of that activity is 172 00:08:15,000 --> 00:08:17,520 Speaker 2: happening very directly in the spot market, while most of 173 00:08:17,560 --> 00:08:20,560 Speaker 2: my companies are the big public truckload or intermodial carriers 174 00:08:20,880 --> 00:08:25,560 Speaker 2: don't really participate quite as deeply in that spot market. 175 00:08:25,640 --> 00:08:28,640 Speaker 2: So his comments around brokerage maybe not being quite as 176 00:08:28,680 --> 00:08:30,640 Speaker 2: bad as what they were seeing or quite as competitive 177 00:08:30,640 --> 00:08:33,000 Speaker 2: as what they were seeing on the truckload or intermotial side, 178 00:08:33,040 --> 00:08:35,440 Speaker 2: I thought was encouraging. So a little bit of a 179 00:08:35,520 --> 00:08:39,160 Speaker 2: nuance here or there to you know, their commentary. Obviously, 180 00:08:39,200 --> 00:08:41,600 Speaker 2: the market took it as negative. Stock was down on 181 00:08:41,640 --> 00:08:44,000 Speaker 2: the day, and we certainly understand that, but I think 182 00:08:44,000 --> 00:08:45,560 Speaker 2: it's kind of a little bit of a mixed bag. 183 00:08:45,600 --> 00:08:47,720 Speaker 2: We have to get a sense of, you know, this 184 00:08:47,800 --> 00:08:51,360 Speaker 2: improvement to come while also measuring our expectations more so 185 00:08:51,440 --> 00:08:52,079 Speaker 2: in the short. 186 00:08:51,960 --> 00:08:55,360 Speaker 1: Term, right, And you know, Gibion is really a diversified 187 00:08:55,720 --> 00:08:59,439 Speaker 1: transportation company and it's really hard to find an equal 188 00:08:59,480 --> 00:09:02,600 Speaker 1: comp now. Their stocks up around three point three percent 189 00:09:03,000 --> 00:09:06,400 Speaker 1: year to date, which is well below the broader markets 190 00:09:06,440 --> 00:09:08,760 Speaker 1: which are up around six and a half percent, but 191 00:09:08,880 --> 00:09:12,319 Speaker 1: doing you know, doing better than their truckload peers, which 192 00:09:12,360 --> 00:09:15,400 Speaker 1: are down around three percent. So what do you think 193 00:09:15,480 --> 00:09:18,839 Speaker 1: is weighing on the shares of JB. Hunt so far 194 00:09:18,880 --> 00:09:19,280 Speaker 1: this year. 195 00:09:19,960 --> 00:09:21,560 Speaker 2: Well, I mean, I think there's a couple of things 196 00:09:21,600 --> 00:09:23,480 Speaker 2: going on. I think, you know, we finished the end 197 00:09:23,520 --> 00:09:26,120 Speaker 2: of last year on a relatively strong note, and so 198 00:09:26,160 --> 00:09:28,400 Speaker 2: we've seen the company kind of bang around this or 199 00:09:28,440 --> 00:09:30,920 Speaker 2: two hundred plus dollar range for a period of time here. 200 00:09:30,960 --> 00:09:32,920 Speaker 2: But I think it's just a fact that it's a 201 00:09:32,920 --> 00:09:35,440 Speaker 2: little bit unclear exactly where we are in the cycle, 202 00:09:35,480 --> 00:09:37,720 Speaker 2: and I think people are looking at the relative valuation 203 00:09:37,800 --> 00:09:39,760 Speaker 2: of a name like JB. Hunt and saying, hey, you know, 204 00:09:39,840 --> 00:09:43,520 Speaker 2: it might be you know, we're not completely clear what 205 00:09:43,559 --> 00:09:45,720 Speaker 2: the next step is. Are we going to see some 206 00:09:45,800 --> 00:09:49,160 Speaker 2: negative estimate revisions for the first quarter and potentially second 207 00:09:49,240 --> 00:09:52,640 Speaker 2: quarter before things get better, or you know, is it 208 00:09:52,840 --> 00:09:54,960 Speaker 2: all systems go? And the volume strength that we're seeing 209 00:09:54,960 --> 00:09:56,920 Speaker 2: at JB. Hunts in ormodial business is just going to 210 00:09:56,960 --> 00:09:59,400 Speaker 2: be a very good leading indicator of things getting better 211 00:09:59,400 --> 00:10:00,640 Speaker 2: as we go through the rest of the year. So 212 00:10:00,640 --> 00:10:02,360 Speaker 2: I think we're a little bit of an indecision point, 213 00:10:02,600 --> 00:10:05,000 Speaker 2: but as much as anything, probably drafting to some extent 214 00:10:05,080 --> 00:10:06,760 Speaker 2: off the back of the fact that the performance in 215 00:10:06,800 --> 00:10:08,719 Speaker 2: the back half of last year was actually pretty. 216 00:10:08,440 --> 00:10:12,360 Speaker 1: Good, right and just finally before we move on from Hunt. 217 00:10:12,960 --> 00:10:14,080 Speaker 1: Do you have a rating on Hunt? 218 00:10:14,600 --> 00:10:15,720 Speaker 2: We are by rated on Hunt? 219 00:10:15,800 --> 00:10:17,040 Speaker 1: Okay? Do you have a price target? 220 00:10:17,600 --> 00:10:19,280 Speaker 2: Two o seven on the price target right now? 221 00:10:19,320 --> 00:10:24,040 Speaker 1: All right? So you know, Also, while in attendance of 222 00:10:24,080 --> 00:10:27,280 Speaker 1: the conference, I thought one of the interesting fireside chats 223 00:10:27,400 --> 00:10:31,120 Speaker 1: was with Alan Shaw, the president's CEO of Norfolk Southern. 224 00:10:31,360 --> 00:10:35,679 Speaker 1: Obviously Norfolk Southern is under activist pressure. Can you talk 225 00:10:35,720 --> 00:10:39,160 Speaker 1: about your main takeaways from that conversation you had with him? 226 00:10:39,880 --> 00:10:42,760 Speaker 2: Yeah, it was a really interesting one because the timing 227 00:10:42,960 --> 00:10:46,800 Speaker 2: was somewhat unique. Right, So we had dinner with Jamie 228 00:10:46,840 --> 00:10:52,080 Speaker 2: boychuk On, who is part of the activist proposal at 229 00:10:52,080 --> 00:10:56,400 Speaker 2: Norfolk Southern to come in as a COO candidate. He 230 00:10:56,520 --> 00:10:58,520 Speaker 2: was with us on Monday night at the conference to 231 00:10:58,600 --> 00:11:01,160 Speaker 2: kick off for dinner, and then and Korra was out 232 00:11:01,200 --> 00:11:04,200 Speaker 2: with their commentary and their slide deck and full slate 233 00:11:04,240 --> 00:11:07,760 Speaker 2: of proposed board members on Tuesday, and then we hosted 234 00:11:07,800 --> 00:11:11,160 Speaker 2: Alan for a fireside chat on Wednesday morning. So the 235 00:11:11,200 --> 00:11:13,960 Speaker 2: sequence of events was kind of interesting leading up to that. 236 00:11:14,480 --> 00:11:15,880 Speaker 2: You know, I think I think there's a couple of 237 00:11:15,880 --> 00:11:18,400 Speaker 2: things that they said. I mean, number one, they did 238 00:11:18,440 --> 00:11:20,520 Speaker 2: have some incremental news to share with us. They did 239 00:11:20,559 --> 00:11:24,600 Speaker 2: say while they reiterated their next three year oh our 240 00:11:24,679 --> 00:11:27,920 Speaker 2: improvement guide of one hundred to one hundred and fifty 241 00:11:27,920 --> 00:11:31,280 Speaker 2: basis points of margin improvement per year, they did note 242 00:11:31,280 --> 00:11:33,319 Speaker 2: that if there was a cyclical OPS swing from a 243 00:11:33,360 --> 00:11:37,720 Speaker 2: volume standpoint, they would outperform that potentially meaningfully. So I 244 00:11:37,760 --> 00:11:40,640 Speaker 2: thought that that was at least a little bit incremental 245 00:11:40,720 --> 00:11:43,000 Speaker 2: to that guide, which was originally issued with the fourth 246 00:11:43,080 --> 00:11:45,520 Speaker 2: quarter earnings not that long ago. So that was the 247 00:11:45,559 --> 00:11:49,120 Speaker 2: first thing. The company, though, however, was a little hesitant 248 00:11:49,160 --> 00:11:52,600 Speaker 2: to kind of get deeply into a rebuttal to what 249 00:11:52,640 --> 00:11:55,840 Speaker 2: we had learned from Ancora the day before, and I 250 00:11:55,840 --> 00:11:58,040 Speaker 2: think the area that we pressed them on to some 251 00:11:58,160 --> 00:12:03,080 Speaker 2: degree was the company's commentary around industry competitive margins. So, 252 00:12:03,640 --> 00:12:07,480 Speaker 2: you know, as is obvious from financial performance in twenty 253 00:12:07,520 --> 00:12:10,840 Speaker 2: twenty three, Norfolk is a laggard from a margin perspective, 254 00:12:10,880 --> 00:12:15,480 Speaker 2: particularly relative to its closest geographic competitor, which is CSX, 255 00:12:15,520 --> 00:12:18,800 Speaker 2: And if you normalize CSX for a trucking company that 256 00:12:18,840 --> 00:12:21,640 Speaker 2: they own, I think the margin gap is actually a 257 00:12:21,640 --> 00:12:24,600 Speaker 2: little bit wider than is what is out there in 258 00:12:24,640 --> 00:12:25,960 Speaker 2: the market. When you just sort of look at the 259 00:12:25,960 --> 00:12:31,880 Speaker 2: financials on a headline basis, and so understanding what industry 260 00:12:31,920 --> 00:12:34,679 Speaker 2: competitive means, I think is going to be really important 261 00:12:34,679 --> 00:12:36,679 Speaker 2: for them. So to be fair to them, they are 262 00:12:36,720 --> 00:12:39,560 Speaker 2: expecting a degree of a trajectory of improvement and at 263 00:12:39,600 --> 00:12:42,880 Speaker 2: this point we're not modeling that type of margin expansion 264 00:12:43,000 --> 00:12:45,080 Speaker 2: for a company like CSX over the course of the 265 00:12:45,120 --> 00:12:47,680 Speaker 2: next few years, and so in theory they would be 266 00:12:47,720 --> 00:12:49,959 Speaker 2: able to close the gap. That being said, I think 267 00:12:50,000 --> 00:12:54,240 Speaker 2: investors generally speaking were somewhat disappointed by that degree of guidance, 268 00:12:54,280 --> 00:12:57,520 Speaker 2: thinking that it wasn't enough to address the underperformance. So 269 00:12:57,520 --> 00:12:59,720 Speaker 2: that's really the heart of the questions that we were asking, 270 00:13:00,480 --> 00:13:03,240 Speaker 2: and Mark George, the CFO, was also with us, and 271 00:13:03,280 --> 00:13:05,280 Speaker 2: I think the thing that maybe they're going to need 272 00:13:05,320 --> 00:13:07,560 Speaker 2: to come back and address, because they didn't really do 273 00:13:07,679 --> 00:13:11,960 Speaker 2: it at the conference, was again, what does industry competitive means? So, 274 00:13:12,000 --> 00:13:14,640 Speaker 2: if we're a few years in the future and CSX 275 00:13:14,720 --> 00:13:17,280 Speaker 2: on an X trucking basis is running at a fifty 276 00:13:17,360 --> 00:13:20,160 Speaker 2: nine to err, let's just say making up numbers, you know, 277 00:13:20,320 --> 00:13:22,720 Speaker 2: is Norfolk going to be within one hundred basis points? 278 00:13:22,840 --> 00:13:24,559 Speaker 2: Is that industry competitive? Is it going to be three 279 00:13:24,640 --> 00:13:27,679 Speaker 2: hundred basis points. I think that's really important for investors 280 00:13:27,679 --> 00:13:29,880 Speaker 2: to know, because I think there's a willingness to see 281 00:13:29,880 --> 00:13:32,080 Speaker 2: a gap between the two of them. Their mix of 282 00:13:32,120 --> 00:13:35,360 Speaker 2: business is a little different. Admittedly, Norfolk has more intermodal, 283 00:13:35,400 --> 00:13:37,520 Speaker 2: which tends to be somewhat lower margin than say the 284 00:13:37,559 --> 00:13:41,360 Speaker 2: merchandise or bulk business. But I think we want to 285 00:13:41,400 --> 00:13:44,320 Speaker 2: see a degree of improvement that really closes the gap 286 00:13:44,400 --> 00:13:47,200 Speaker 2: materially from where they are today. So a lot of 287 00:13:47,200 --> 00:13:50,199 Speaker 2: our conversations surrounded that. My sense is we're going to 288 00:13:50,240 --> 00:13:53,440 Speaker 2: hear more officially from Norfolk as we get closer to 289 00:13:53,520 --> 00:13:57,240 Speaker 2: a potential to when the definitive proxy information comes out 290 00:13:57,360 --> 00:14:00,320 Speaker 2: and ultimately when we might have a shareholder vote between 291 00:14:00,400 --> 00:14:03,439 Speaker 2: these two slates and the proxy. But that's that was 292 00:14:03,480 --> 00:14:04,880 Speaker 2: sort of the key issue that we were trying to 293 00:14:04,880 --> 00:14:06,480 Speaker 2: attack in the conversation. 294 00:14:06,040 --> 00:14:08,360 Speaker 1: We had right and that five hundred and thirty basis 295 00:14:08,400 --> 00:14:11,840 Speaker 1: point difference in operating ratio, And for those who don't know, 296 00:14:11,880 --> 00:14:14,920 Speaker 1: operating ratios is the inverse of an ebit margin, So 297 00:14:15,320 --> 00:14:18,280 Speaker 1: the lower the number the better. Between it and CSX, 298 00:14:18,320 --> 00:14:21,680 Speaker 1: which is as close as competitor, you know, really has 299 00:14:21,840 --> 00:14:25,120 Speaker 1: been magnified because of the derailment that they had last 300 00:14:25,200 --> 00:14:29,120 Speaker 1: year in East Palestine. So that's had a big impact. 301 00:14:29,240 --> 00:14:30,960 Speaker 1: And you know, it's interesting because you know, I know, 302 00:14:31,000 --> 00:14:33,000 Speaker 1: you've been covering this space for a long time. There 303 00:14:33,080 --> 00:14:35,160 Speaker 1: was one there was at a time, I don't know, 304 00:14:35,400 --> 00:14:37,400 Speaker 1: maybe two thousand and seven or two thousand and nine 305 00:14:37,640 --> 00:14:41,320 Speaker 1: where Norfolk Southern was considered the gold standard in the East, 306 00:14:41,320 --> 00:14:44,240 Speaker 1: and that was before CSX went through there a very 307 00:14:44,480 --> 00:14:46,640 Speaker 1: aggressive PSR transformation. 308 00:14:48,160 --> 00:14:50,360 Speaker 2: That's absolutely right, I mean, and it's a really good 309 00:14:50,360 --> 00:14:52,520 Speaker 2: point that that isn't lost on me because you know, 310 00:14:52,520 --> 00:14:54,720 Speaker 2: when I started covering this space back in two thousand 311 00:14:54,720 --> 00:14:57,680 Speaker 2: and five, You're absolutely right, and AS was the best 312 00:14:57,680 --> 00:14:59,920 Speaker 2: in class kind of across the board with the America 313 00:15:00,280 --> 00:15:04,400 Speaker 2: maybe ex Canadian National, and you know, they have been 314 00:15:04,520 --> 00:15:08,440 Speaker 2: surpassed by essentially all of the other railroads except for BNSF, 315 00:15:09,680 --> 00:15:11,560 Speaker 2: and so I think that has been you know, it's 316 00:15:11,560 --> 00:15:13,960 Speaker 2: been interesting to see that play out. And to your point, 317 00:15:14,240 --> 00:15:17,160 Speaker 2: you know, we understand some of the headwinds that NS 318 00:15:17,200 --> 00:15:19,840 Speaker 2: faced as they went through last year, and we're recovering 319 00:15:19,880 --> 00:15:22,560 Speaker 2: from what was a very high profile derailment in Ohio. 320 00:15:23,480 --> 00:15:26,720 Speaker 2: We think that the opportunity is actually fairly large for 321 00:15:26,920 --> 00:15:29,480 Speaker 2: NS going forward, and that's why we're constructive on the stock, 322 00:15:29,960 --> 00:15:33,040 Speaker 2: whether it be this existing management team maybe feeling a 323 00:15:33,080 --> 00:15:37,000 Speaker 2: degree of pressure and sort of leaning into their opportunity 324 00:15:37,080 --> 00:15:40,640 Speaker 2: for margin expansion, or coming from you know, a different 325 00:15:40,680 --> 00:15:43,720 Speaker 2: slate of directors and potentially management team. We think the 326 00:15:43,760 --> 00:15:46,520 Speaker 2: opportunity is large, and as we measure it, there's probably 327 00:15:46,520 --> 00:15:49,400 Speaker 2: seven or eight hundred basis points of potential margin improvement. 328 00:15:49,600 --> 00:15:52,080 Speaker 2: That's three dollars a share of earnings on let's call 329 00:15:52,120 --> 00:15:55,200 Speaker 2: it a thirteen plus dollar base this year. There's a 330 00:15:55,240 --> 00:15:57,760 Speaker 2: lot of upside if we can get some of that 331 00:15:57,800 --> 00:16:01,280 Speaker 2: improvement maybe accelerated over the cour of the next few years. 332 00:16:01,320 --> 00:16:04,840 Speaker 2: So some interesting dynamics going on there. In our opinion, 333 00:16:04,880 --> 00:16:07,440 Speaker 2: actually a fairly good opportunity for the stock. 334 00:16:07,920 --> 00:16:11,200 Speaker 1: And Jamie Boychick you mentioned you guys had dinner with him. 335 00:16:11,520 --> 00:16:14,800 Speaker 1: You know, Norfolk Southern doesn't have the opportunity to cut 336 00:16:14,840 --> 00:16:17,240 Speaker 1: heads like they did at CSX when they were going 337 00:16:17,240 --> 00:16:20,840 Speaker 1: through their transformation, because a lot of that has been 338 00:16:21,000 --> 00:16:24,680 Speaker 1: done already, at least in the management ranks are starting 339 00:16:24,720 --> 00:16:27,480 Speaker 1: to do that, and you know, the industry as a 340 00:16:27,480 --> 00:16:31,560 Speaker 1: whole has reduced headcount for quite some time now, so 341 00:16:31,840 --> 00:16:35,760 Speaker 1: did he share at all what his plans were, how 342 00:16:35,800 --> 00:16:39,200 Speaker 1: he was going to make Norfolk Southern a better operator 343 00:16:39,240 --> 00:16:41,840 Speaker 1: and more profitable and more and safer. 344 00:16:43,160 --> 00:16:46,200 Speaker 2: Well, you know, he laid out a little bit of 345 00:16:46,200 --> 00:16:49,360 Speaker 2: a framework, So we did have dinner with him on Monday. 346 00:16:49,480 --> 00:16:53,360 Speaker 2: The actual slide deck from Encora with more detail came 347 00:16:53,400 --> 00:16:56,600 Speaker 2: out on Tuesday. Right, what we heard from Jamie is 348 00:16:56,600 --> 00:16:59,280 Speaker 2: exactly as you articulated. This is not about headcount, right, 349 00:16:59,320 --> 00:17:02,160 Speaker 2: This is not about out what some critics of PSR 350 00:17:02,240 --> 00:17:05,440 Speaker 2: would suggest is a gutting of the workforce as they 351 00:17:05,520 --> 00:17:10,120 Speaker 2: just look for profit over service, over reliability and safety. 352 00:17:10,359 --> 00:17:13,439 Speaker 2: This is more about sort of incremental nuance change. And 353 00:17:13,440 --> 00:17:15,560 Speaker 2: I think a lot of it really revolves around Norfolk 354 00:17:15,600 --> 00:17:19,120 Speaker 2: Southern's merchandise business, and I think that is really the key. 355 00:17:19,119 --> 00:17:22,480 Speaker 2: And even NS would admit that as they were recovering 356 00:17:22,560 --> 00:17:27,480 Speaker 2: from the derailment last year, they really emphasized the intermodal 357 00:17:27,520 --> 00:17:29,840 Speaker 2: business and the service they were providing to their intermodial 358 00:17:29,880 --> 00:17:32,720 Speaker 2: customers because they felt it was most service sensitive and 359 00:17:32,880 --> 00:17:35,720 Speaker 2: most subject to potential competition from truck and they let 360 00:17:35,720 --> 00:17:38,560 Speaker 2: the merchandise business falter to some degree. And so I 361 00:17:38,560 --> 00:17:41,640 Speaker 2: think both Jamie and the company would agree that they're 362 00:17:41,640 --> 00:17:45,440 Speaker 2: focused on improving that piece of the business, reducing car 363 00:17:45,480 --> 00:17:49,840 Speaker 2: handling events, improving the velocity there, ultimately pulling out costs. 364 00:17:49,880 --> 00:17:51,760 Speaker 2: And you know, we're talking about things like how many 365 00:17:51,760 --> 00:17:54,240 Speaker 2: locomotives are in service, how many locomotive do you actually 366 00:17:54,280 --> 00:17:57,639 Speaker 2: need that'll benefit both your OPAX from a PS and 367 00:17:57,720 --> 00:18:01,639 Speaker 2: O purchase service and other operation expenses, as well as 368 00:18:01,680 --> 00:18:05,719 Speaker 2: things like fuel and even safety and insurance to some degree. 369 00:18:05,800 --> 00:18:08,000 Speaker 2: So I think there are a number of factors that 370 00:18:08,080 --> 00:18:11,120 Speaker 2: he's looking at in terms of some nearer term targets. 371 00:18:11,160 --> 00:18:14,640 Speaker 2: I think it's important to note that the slate, including 372 00:18:14,720 --> 00:18:17,720 Speaker 2: Jamie Boychuck, are suggesting that within about eighteen months they 373 00:18:17,720 --> 00:18:20,879 Speaker 2: can get the operating ratio into the neighborhood of sixty 374 00:18:20,880 --> 00:18:23,400 Speaker 2: two or sixty three percent. Now, we're going to look 375 00:18:23,440 --> 00:18:26,520 Speaker 2: for more specificity around their targets and plans as we 376 00:18:26,640 --> 00:18:29,879 Speaker 2: move forward in this proxy process, but I thought that 377 00:18:29,960 --> 00:18:33,080 Speaker 2: was an interesting benchmark for us to use relative to 378 00:18:33,080 --> 00:18:35,320 Speaker 2: what NS has said. So I think that right now 379 00:18:35,400 --> 00:18:37,520 Speaker 2: is sort of the bid ask in the market with 380 00:18:37,800 --> 00:18:40,679 Speaker 2: the Enchorus late around that sixty two to sixty three percent, 381 00:18:41,160 --> 00:18:44,439 Speaker 2: and as talking about something that's a little bit higher 382 00:18:44,480 --> 00:18:46,439 Speaker 2: than that as they execute on that one hundred to 383 00:18:46,440 --> 00:18:48,200 Speaker 2: one hundred and fifty basis points per year. 384 00:18:48,800 --> 00:18:51,919 Speaker 1: Right, Well, I guess the drama will unfold and it'll 385 00:18:52,000 --> 00:18:55,040 Speaker 1: definitely give analyst more to write about in the future. 386 00:18:56,200 --> 00:18:59,080 Speaker 1: Never a dull moment, absolutely, So, you know, we talked 387 00:18:59,119 --> 00:19:01,199 Speaker 1: about Norfolk, Southern, talked about jab Hunt, where there are 388 00:19:01,240 --> 00:19:03,760 Speaker 1: other names that you know come to your mind that 389 00:19:04,440 --> 00:19:08,879 Speaker 1: you know, provided some really interesting incremental information, whether it 390 00:19:08,920 --> 00:19:11,479 Speaker 1: was companies specific or about the industries that they operate in. 391 00:19:12,520 --> 00:19:14,200 Speaker 2: Yeah, I think there's a couple of things. I mean, 392 00:19:14,280 --> 00:19:16,720 Speaker 2: you know, maybe broadly in terms of the industry, and 393 00:19:16,720 --> 00:19:19,080 Speaker 2: then I'll zoom into a couple of companies that I 394 00:19:19,080 --> 00:19:22,160 Speaker 2: think are interesting. But you know, one of the things 395 00:19:22,200 --> 00:19:24,240 Speaker 2: that is a little different that came across on an 396 00:19:24,280 --> 00:19:27,840 Speaker 2: industry level was the LTL commentary. So LTL stocks like 397 00:19:28,280 --> 00:19:30,879 Speaker 2: XPO and PSIA and Old Dominion, even our best have 398 00:19:30,960 --> 00:19:33,320 Speaker 2: done remarkably well over the course of the last twelve 399 00:19:33,320 --> 00:19:36,520 Speaker 2: months and have been beneficiaries of, you know, the the 400 00:19:36,600 --> 00:19:39,040 Speaker 2: consolidation event that occurred in the middle of last year 401 00:19:39,040 --> 00:19:43,600 Speaker 2: in the industry. Their commentary continued to be quite robust. 402 00:19:43,680 --> 00:19:47,200 Speaker 2: So I think the expectation is, while valuation is fairly high, 403 00:19:47,280 --> 00:19:51,040 Speaker 2: with these names, they are clearly in a better position 404 00:19:51,160 --> 00:19:54,680 Speaker 2: to deliver in line to better results in the near term. 405 00:19:54,760 --> 00:19:57,119 Speaker 2: And I think that is an interesting comparison to what 406 00:19:57,160 --> 00:19:59,119 Speaker 2: we were talking about with names like JB. Hunt or 407 00:19:59,160 --> 00:20:01,840 Speaker 2: even truck names like Werner who are at the conference, 408 00:20:02,000 --> 00:20:04,080 Speaker 2: and frankly even some of the railroads who had some 409 00:20:04,160 --> 00:20:06,720 Speaker 2: weather issues to deal with. In one queue where I 410 00:20:06,760 --> 00:20:09,719 Speaker 2: think expectations or estimates have a degree of risk, right, 411 00:20:09,720 --> 00:20:13,080 Speaker 2: I think there is some aspect of the quarter to 412 00:20:13,200 --> 00:20:16,160 Speaker 2: date trending a bit below expectations, and I think that's 413 00:20:16,240 --> 00:20:19,600 Speaker 2: what is a little bit unique about the ltls. They're expensive, 414 00:20:19,920 --> 00:20:21,879 Speaker 2: but you're paying for a little bit more of a 415 00:20:21,960 --> 00:20:25,119 Speaker 2: near term certainty. So I think investors continue to gravitate 416 00:20:25,160 --> 00:20:28,040 Speaker 2: to those names because they do sound so good. So 417 00:20:28,080 --> 00:20:30,480 Speaker 2: I think that was another interesting area of conversation. Like 418 00:20:30,560 --> 00:20:32,680 Speaker 2: I said, we had our best there. We had OD, 419 00:20:32,880 --> 00:20:34,320 Speaker 2: we had cy, and we had XBO. 420 00:20:34,920 --> 00:20:38,680 Speaker 1: Yeah, the the LTL industry has been on fire for 421 00:20:38,760 --> 00:20:41,800 Speaker 1: actually for quite some time, but especially over the last 422 00:20:42,359 --> 00:20:45,280 Speaker 1: we'll call it, since the summer when Yellow and bankrupt 423 00:20:45,720 --> 00:20:48,600 Speaker 1: the industry as a whole or up around the stocks 424 00:20:48,600 --> 00:20:52,200 Speaker 1: are up around twenty percent, that's the bi LTL index, 425 00:20:52,480 --> 00:20:55,480 Speaker 1: and again that's much better than the broader market, which 426 00:20:55,520 --> 00:20:59,080 Speaker 1: is up six and a half percent. And the kind 427 00:20:59,119 --> 00:21:02,639 Speaker 1: of strength has been like by XBO and Saya, so 428 00:21:02,960 --> 00:21:05,119 Speaker 1: very very interesting stuff going on there. I mean some 429 00:21:05,160 --> 00:21:08,040 Speaker 1: of those stocks they almost look like Navidia than the 430 00:21:08,160 --> 00:21:09,639 Speaker 1: videos of the transports world. 431 00:21:10,640 --> 00:21:13,040 Speaker 2: Yeah, it's not lost on me that there. You know, 432 00:21:13,240 --> 00:21:14,840 Speaker 2: I think the market looks at a lot of different 433 00:21:14,840 --> 00:21:18,119 Speaker 2: things when they look at ltls, and factors are important, 434 00:21:18,200 --> 00:21:20,200 Speaker 2: right and I think momentum and what we're seeing in 435 00:21:20,840 --> 00:21:25,360 Speaker 2: names like some of those higher flying tech companies, I think, 436 00:21:25,400 --> 00:21:27,480 Speaker 2: you know, if people were actually just to look at 437 00:21:27,840 --> 00:21:30,720 Speaker 2: some of those stock charts overlaid with stock charts of 438 00:21:30,760 --> 00:21:33,280 Speaker 2: companies like XPO, SIA and Old Dominion, I think you'll 439 00:21:33,280 --> 00:21:36,080 Speaker 2: see an interesting comparison there, So something to take a 440 00:21:36,080 --> 00:21:38,480 Speaker 2: look at for us kind of boring old transport guys. 441 00:21:39,160 --> 00:21:41,719 Speaker 2: These are fairly exciting stocks as it stands right now. 442 00:21:41,840 --> 00:21:44,320 Speaker 2: Like I said, fundamentals are quite good and they will 443 00:21:44,359 --> 00:21:47,200 Speaker 2: be beneficiaries you know when the cycle turns as well. 444 00:21:47,240 --> 00:21:49,200 Speaker 2: What we have to remember that they are putting together 445 00:21:49,240 --> 00:21:53,000 Speaker 2: what are fairly good results even with you know, kind 446 00:21:53,000 --> 00:21:55,399 Speaker 2: of a softer volume environment that we're in right now. 447 00:21:55,720 --> 00:21:58,040 Speaker 1: Yeah, you know, sitting into fireside chats, I thought some 448 00:21:58,080 --> 00:22:00,760 Speaker 1: of the interesting commentary was from Old Dominion Management when 449 00:22:00,800 --> 00:22:05,199 Speaker 1: they mentioned about a third of Yellow's tonnage might be 450 00:22:05,240 --> 00:22:07,919 Speaker 1: in the truckload market and could come back to the 451 00:22:08,080 --> 00:22:11,080 Speaker 1: LTL market once the truckload market firms up. You know, 452 00:22:11,160 --> 00:22:13,280 Speaker 1: Saya kind of said they really didn't see that, but 453 00:22:14,200 --> 00:22:16,640 Speaker 1: you know, it was I thought a very interesting commentary 454 00:22:16,840 --> 00:22:19,880 Speaker 1: and could provide another leg up in terms of growth 455 00:22:20,200 --> 00:22:21,720 Speaker 1: for the industry going forward. 456 00:22:23,240 --> 00:22:25,040 Speaker 2: I agree, and you know, some of the work that 457 00:22:25,040 --> 00:22:28,480 Speaker 2: we've done independent of what Old Dominion talked about, suggested 458 00:22:28,520 --> 00:22:30,120 Speaker 2: the same thing. I think if you were to look 459 00:22:30,160 --> 00:22:33,600 Speaker 2: at the you know, the shipments that came from Yellow 460 00:22:34,720 --> 00:22:37,680 Speaker 2: and were dispersed across the industry, at least for the 461 00:22:37,720 --> 00:22:40,040 Speaker 2: public carriers where we can see their shipments on a 462 00:22:40,080 --> 00:22:43,840 Speaker 2: daily basis, you know, there is a pretty healthy amount 463 00:22:43,840 --> 00:22:46,119 Speaker 2: of volume that's unaccounted for, and I think it's a 464 00:22:46,160 --> 00:22:49,920 Speaker 2: reasonable assumption to expect that that business went into the 465 00:22:49,920 --> 00:22:52,440 Speaker 2: truckload market. So, you know, I don't know that all 466 00:22:52,480 --> 00:22:54,800 Speaker 2: of it comes back, but at some point a tighter 467 00:22:54,840 --> 00:22:58,200 Speaker 2: truckload market certainly will it always is a beneficiary to 468 00:22:58,240 --> 00:23:00,840 Speaker 2: the LTL market, just given the relatives. Right, you get 469 00:23:00,840 --> 00:23:03,800 Speaker 2: a tight truckload market, you get spillover freight coming from 470 00:23:03,840 --> 00:23:07,000 Speaker 2: truckload into LTL. And to think that there's actually maybe 471 00:23:07,040 --> 00:23:10,000 Speaker 2: some natural freight that would would maybe want to come 472 00:23:10,040 --> 00:23:12,800 Speaker 2: back more quickly into the LTL market, I think is 473 00:23:13,200 --> 00:23:16,000 Speaker 2: quite a positive. So, like I said, they will benefit 474 00:23:16,080 --> 00:23:18,240 Speaker 2: from an improvement in the cycle as we go forward. 475 00:23:18,280 --> 00:23:20,880 Speaker 2: They already have very good pricing which is above their 476 00:23:20,920 --> 00:23:23,399 Speaker 2: cost inflation, and they could get a little bit of 477 00:23:23,400 --> 00:23:25,119 Speaker 2: that volume kicker as we moved through the rest of 478 00:23:25,119 --> 00:23:25,960 Speaker 2: the year. It would be great to. 479 00:23:25,920 --> 00:23:29,840 Speaker 1: See, you know, in the beginning conversation you mentioned, you know, 480 00:23:30,359 --> 00:23:34,479 Speaker 1: some optimism, cautious optimism among some of the management teams. 481 00:23:35,680 --> 00:23:38,800 Speaker 1: You know, it seems like the truckload market's been, as 482 00:23:38,840 --> 00:23:41,120 Speaker 1: you mentioned, bouncing along the bottom for quite some time. 483 00:23:41,200 --> 00:23:43,040 Speaker 1: We're kind of waiting for capacity to come out of 484 00:23:43,080 --> 00:23:47,040 Speaker 1: the market. Did management of any of the truckload carriers 485 00:23:47,200 --> 00:23:49,680 Speaker 1: that you spoke with, did they give you any kind 486 00:23:49,680 --> 00:23:53,160 Speaker 1: of green shoots that they're seeing that maybe we can 487 00:23:53,280 --> 00:23:56,400 Speaker 1: kind of grab onto and think that the market's going 488 00:23:56,440 --> 00:23:58,800 Speaker 1: to turn here soon, you know. 489 00:23:58,920 --> 00:24:02,280 Speaker 2: Unfortunately, not real, is the short answer to that question. 490 00:24:03,040 --> 00:24:06,000 Speaker 2: You know. I think the fact that February, which is 491 00:24:06,040 --> 00:24:10,360 Speaker 2: always basically the worst year for truckload freight in the calendar, 492 00:24:10,359 --> 00:24:14,240 Speaker 2: the worst month in the calendar rather, is something, you 493 00:24:14,240 --> 00:24:16,560 Speaker 2: know that's not lost on us. But given that dynamic 494 00:24:16,640 --> 00:24:19,320 Speaker 2: and the fact that January actually ended on a pretty 495 00:24:19,320 --> 00:24:21,560 Speaker 2: strong note because of some of the weather disruption that 496 00:24:21,600 --> 00:24:26,320 Speaker 2: impacted capacity during that month, I think that sequential deceleration 497 00:24:26,520 --> 00:24:29,040 Speaker 2: is something that was kind of weighing heavy on people's minds. 498 00:24:29,080 --> 00:24:32,080 Speaker 2: So I think there is, like I said, cautious optimism, 499 00:24:32,800 --> 00:24:34,960 Speaker 2: But within the truckload market, I don't know that there's 500 00:24:35,000 --> 00:24:37,560 Speaker 2: a lot to specifically point to that would say hey, 501 00:24:37,560 --> 00:24:40,960 Speaker 2: things are turning right now. That being said, what we 502 00:24:41,000 --> 00:24:43,119 Speaker 2: look at is maybe broadening the lens a little bit 503 00:24:43,160 --> 00:24:45,359 Speaker 2: and saying, hey, let's look at what's going on in 504 00:24:45,400 --> 00:24:48,520 Speaker 2: terms of containerized imports. And I cover both transports and shipping, 505 00:24:48,560 --> 00:24:50,000 Speaker 2: as you noted at the top of the show, and 506 00:24:50,320 --> 00:24:52,520 Speaker 2: you know, we spend a lot of time connecting the 507 00:24:52,080 --> 00:24:55,840 Speaker 2: dots between those, and I think containerized imports it's very 508 00:24:55,960 --> 00:24:59,040 Speaker 2: clear in the data historically that that is a leading 509 00:24:59,040 --> 00:25:01,639 Speaker 2: indicator of and freight, and I think what it shows 510 00:25:01,760 --> 00:25:04,480 Speaker 2: is that we really are towards the end of retail 511 00:25:04,560 --> 00:25:07,760 Speaker 2: d stocking. So we're at a much better inventory level 512 00:25:08,240 --> 00:25:11,240 Speaker 2: now than we were three, six, nine, twelve months ago. 513 00:25:11,800 --> 00:25:15,480 Speaker 2: And assuming that the labor market stays relatively resilient, and 514 00:25:15,720 --> 00:25:18,400 Speaker 2: that's probably a bigger argument, then I'm, you know, sort 515 00:25:18,400 --> 00:25:20,560 Speaker 2: of above my pay grade in terms of making that call. 516 00:25:20,840 --> 00:25:23,280 Speaker 2: But assuming that that's the case, you know, demand has 517 00:25:23,280 --> 00:25:25,639 Speaker 2: the potential to remain resilient as we go forward, and 518 00:25:25,640 --> 00:25:27,639 Speaker 2: we could see a little bit more clear evidence of it. 519 00:25:27,640 --> 00:25:30,040 Speaker 2: We've done a lot of work on the negative impact 520 00:25:30,080 --> 00:25:32,520 Speaker 2: of inventory d stocking on freight over the course of 521 00:25:32,560 --> 00:25:35,040 Speaker 2: the last year. I think it peaked at its worst 522 00:25:35,040 --> 00:25:38,159 Speaker 2: and probably August, and it's gotten consistently better through the 523 00:25:38,280 --> 00:25:40,560 Speaker 2: end of the year, and it's about a point or 524 00:25:40,640 --> 00:25:44,440 Speaker 2: two point drag on overall industry volume kind of coming 525 00:25:44,480 --> 00:25:46,399 Speaker 2: into the beginning of this year that continues. If that 526 00:25:46,400 --> 00:25:49,320 Speaker 2: continues to move up towards sort of neutral, then I 527 00:25:49,359 --> 00:25:52,199 Speaker 2: think there is a nice little opportunity for improvement as 528 00:25:52,240 --> 00:25:55,600 Speaker 2: we go forward. But you know, capacity still is lingering 529 00:25:56,440 --> 00:25:59,320 Speaker 2: and a little bit too much capacity in the market 530 00:25:59,680 --> 00:26:03,520 Speaker 2: for the ruckled sector to really feel it just yet. 531 00:26:04,440 --> 00:26:07,520 Speaker 1: And did you have any parcel providers at the conference? 532 00:26:08,520 --> 00:26:11,360 Speaker 2: So UPS was there. They did one on one meetings 533 00:26:11,400 --> 00:26:14,800 Speaker 2: only FedEx, you know, is in their quiet period, so 534 00:26:14,840 --> 00:26:16,720 Speaker 2: they didn't join us this year, although they have in 535 00:26:16,760 --> 00:26:21,080 Speaker 2: the past, you know. I So UPS was there doing meetings, 536 00:26:21,080 --> 00:26:23,560 Speaker 2: I think is the short answer to that. What we've 537 00:26:23,560 --> 00:26:25,800 Speaker 2: heard in terms of feedback in our general view on 538 00:26:25,920 --> 00:26:29,840 Speaker 2: UPS is what's happening is that the company has obviously 539 00:26:29,880 --> 00:26:33,240 Speaker 2: now given us some outlook for twenty twenty four, including 540 00:26:33,320 --> 00:26:36,760 Speaker 2: some near term guidance for the first quarter that came 541 00:26:36,800 --> 00:26:39,280 Speaker 2: in below people's expectations when they put that out. In 542 00:26:39,320 --> 00:26:42,639 Speaker 2: the fourth quarter, numbers have come down. Estimates have come down, 543 00:26:42,680 --> 00:26:44,600 Speaker 2: which I think is a good thing, and there has 544 00:26:44,680 --> 00:26:47,679 Speaker 2: been some discussion of whether or not the guidance is 545 00:26:47,760 --> 00:26:51,200 Speaker 2: conservative enough that we won't see another kind of weak 546 00:26:51,240 --> 00:26:54,280 Speaker 2: result relative to expectations. We're getting a little bit more 547 00:26:54,320 --> 00:26:56,359 Speaker 2: constructed that that is going to be the case that 548 00:26:56,359 --> 00:26:58,360 Speaker 2: we're going to end up seeing numbers kind of come 549 00:26:58,359 --> 00:27:00,960 Speaker 2: in roughly around where the street is today, which I 550 00:27:00,960 --> 00:27:03,399 Speaker 2: think is a good setup. And we also have the 551 00:27:03,440 --> 00:27:05,480 Speaker 2: company also as an investor day coming at the end 552 00:27:05,480 --> 00:27:08,440 Speaker 2: of March, which I think could be potentially a positive catalyst. 553 00:27:08,480 --> 00:27:12,000 Speaker 2: We've written a lot about maybe further cost reduction initiatives 554 00:27:12,000 --> 00:27:14,520 Speaker 2: coming out of that conference, and then if they follow 555 00:27:14,520 --> 00:27:17,200 Speaker 2: it up a month later with maybe a solid first 556 00:27:17,280 --> 00:27:21,000 Speaker 2: quarter result, it could be the beginnings of an improvement 557 00:27:21,040 --> 00:27:24,080 Speaker 2: and sentiment for UPS, which has been somewhat negative over 558 00:27:24,119 --> 00:27:25,680 Speaker 2: the course of the last several quarters. 559 00:27:26,480 --> 00:27:30,080 Speaker 1: Right, So, were there any other broad takeaways that you 560 00:27:30,920 --> 00:27:33,480 Speaker 1: came out of Miami? Besides you know how to work 561 00:27:33,520 --> 00:27:34,560 Speaker 1: on your tan there. 562 00:27:36,080 --> 00:27:37,760 Speaker 2: It was certainly nice to get a little bit more 563 00:27:37,760 --> 00:27:39,880 Speaker 2: sunshine than I've been enjoying up here in the Northeast, 564 00:27:39,880 --> 00:27:42,280 Speaker 2: as you know all too well. Unfortunately, I think the 565 00:27:42,359 --> 00:27:44,520 Speaker 2: last thing that I kind of throw out there. The 566 00:27:44,560 --> 00:27:46,480 Speaker 2: other company I wanted to highlight that I thought was 567 00:27:46,560 --> 00:27:49,639 Speaker 2: very interesting was Canadian Pacific. So we were joined by 568 00:27:49,720 --> 00:27:53,680 Speaker 2: CEO Keith Creole, who is a very talented executive obviously, 569 00:27:53,880 --> 00:27:57,040 Speaker 2: and CPKC has a very unique story within the railroads 570 00:27:57,080 --> 00:27:59,680 Speaker 2: because in this post merger world, they connect the three 571 00:27:59,760 --> 00:28:02,040 Speaker 2: cun trees of North America, and I think that does 572 00:28:02,080 --> 00:28:05,399 Speaker 2: provide them some incremental opportunities on the volume side. But 573 00:28:05,440 --> 00:28:08,359 Speaker 2: what I thought was really more interesting than that was 574 00:28:08,400 --> 00:28:12,280 Speaker 2: their commentary on pricing. I think the broad dynamic within 575 00:28:12,400 --> 00:28:17,320 Speaker 2: rail pricing in twenty twenty four is that the spread 576 00:28:17,440 --> 00:28:21,080 Speaker 2: between price and cost is actually going to be fairly 577 00:28:21,200 --> 00:28:24,119 Speaker 2: narrow for most players, while on the other hand, CP 578 00:28:24,240 --> 00:28:27,199 Speaker 2: has been more constructive about that. And really when we 579 00:28:27,280 --> 00:28:29,920 Speaker 2: kind of probed into it during our conversation with Keith, 580 00:28:30,280 --> 00:28:33,919 Speaker 2: what he noted was that legacy contracts, both on the 581 00:28:33,960 --> 00:28:36,600 Speaker 2: CP side and the KCS side, when they were coming 582 00:28:36,680 --> 00:28:39,120 Speaker 2: up for renewal, not only were they able to catch 583 00:28:39,200 --> 00:28:41,080 Speaker 2: up on some of the inflation that maybe they didn't 584 00:28:41,120 --> 00:28:43,840 Speaker 2: realize over the course of a multi year contract, but 585 00:28:43,880 --> 00:28:46,600 Speaker 2: they were also selling a different product now than they 586 00:28:46,600 --> 00:28:48,920 Speaker 2: were selling when they had originally signed a deal a 587 00:28:48,920 --> 00:28:51,440 Speaker 2: few years ago, Meaning if you were a CP customer, 588 00:28:51,480 --> 00:28:53,960 Speaker 2: then you were now getting access to the KCS network 589 00:28:54,120 --> 00:28:57,440 Speaker 2: and vice versa. That seems to be driving a degree 590 00:28:57,440 --> 00:29:00,920 Speaker 2: of price acceleration for Canadian Pacific, which I think is 591 00:29:00,960 --> 00:29:03,520 Speaker 2: somewhat unique in this market. So, you know, we all 592 00:29:03,600 --> 00:29:06,280 Speaker 2: kind of know the potential opportunity for them on the 593 00:29:06,360 --> 00:29:09,720 Speaker 2: volume side, and clearly CP has historically been you know, 594 00:29:09,800 --> 00:29:12,840 Speaker 2: a very efficient operator, and it has the ability to 595 00:29:12,880 --> 00:29:16,320 Speaker 2: drive good margin performance if you can get those two dynamics, 596 00:29:16,320 --> 00:29:19,080 Speaker 2: but also accelerating pricing when the rest of the industry 597 00:29:19,120 --> 00:29:21,760 Speaker 2: maybe is not seeing it. I think that could be unique. 598 00:29:21,760 --> 00:29:22,920 Speaker 2: It certainly stood out to us. 599 00:29:23,480 --> 00:29:27,600 Speaker 1: Yeah, CP is definitely a growth railroad within the rail industry, 600 00:29:27,880 --> 00:29:31,600 Speaker 1: and Keith is quite the dynamic leader, you know, He's 601 00:29:31,640 --> 00:29:35,720 Speaker 1: like the Tony Robbins of transportation. CEO is very, very motivating, 602 00:29:35,800 --> 00:29:38,880 Speaker 1: and you always come away feeling that he kind of 603 00:29:38,920 --> 00:29:42,600 Speaker 1: can really charge up his workforce and get them really motivated. 604 00:29:42,640 --> 00:29:48,120 Speaker 1: So it's always great to hear him speak. All right, So, 605 00:29:48,120 --> 00:29:51,160 Speaker 1: so do you have any thoughts. You know, we talked 606 00:29:51,160 --> 00:29:52,960 Speaker 1: a little bit about ups, but you have any thoughts 607 00:29:53,000 --> 00:29:54,720 Speaker 1: on the air freight market as it relates to maybe 608 00:29:54,720 --> 00:29:58,160 Speaker 1: to forwarders. I don't know if you sat in any 609 00:29:58,160 --> 00:30:02,600 Speaker 1: of the airline conversation or heard from anyone on the 610 00:30:02,880 --> 00:30:04,080 Speaker 1: air freight side of things. 611 00:30:04,760 --> 00:30:08,000 Speaker 2: Well, we also had, you know, my colleague from Europe 612 00:30:08,000 --> 00:30:11,200 Speaker 2: Ctitucia Kumara joined us at the conference as well. He 613 00:30:11,280 --> 00:30:15,480 Speaker 2: hosted companies like marrisk and DSV, and I think there 614 00:30:15,640 --> 00:30:19,000 Speaker 2: was maybe some broad commentary that we heard from lots 615 00:30:19,000 --> 00:30:21,760 Speaker 2: of companies and generally folks who are in that industry 616 00:30:21,800 --> 00:30:24,600 Speaker 2: on the air freight side broadly, I think the commentary 617 00:30:24,640 --> 00:30:29,640 Speaker 2: that we heard you generally speaking was that while the 618 00:30:29,680 --> 00:30:33,680 Speaker 2: Red Sea has caused a degree of capacity absorption in 619 00:30:33,880 --> 00:30:36,800 Speaker 2: ocean freight because of the longer journey around the Cape 620 00:30:36,800 --> 00:30:39,840 Speaker 2: of Good Hope as folks are avoiding the Suez Canal 621 00:30:40,400 --> 00:30:44,200 Speaker 2: that has absorbed this ocean capacity, we haven't necessarily seen 622 00:30:44,360 --> 00:30:47,280 Speaker 2: a big trade up into the air. So, you know, 623 00:30:47,360 --> 00:30:50,440 Speaker 2: air cargo rates have been okay and reasonably resilient relative 624 00:30:50,440 --> 00:30:53,000 Speaker 2: to people's fairly low expectations, but we haven't really seen 625 00:30:53,040 --> 00:30:55,720 Speaker 2: a significant translation of that. And I think as we've 626 00:30:55,760 --> 00:30:58,720 Speaker 2: come out of the peak season where there was a 627 00:30:58,760 --> 00:31:03,960 Speaker 2: lot of Asia outbound activity related to sort of high volume, 628 00:31:04,080 --> 00:31:08,360 Speaker 2: potentially somewhat low value e commerce moves, you know, we're 629 00:31:08,400 --> 00:31:12,880 Speaker 2: not necessarily seeing that being passed off to a stronger 630 00:31:12,920 --> 00:31:16,520 Speaker 2: performance because of this ocean to air trade up as 631 00:31:16,520 --> 00:31:19,120 Speaker 2: it stands right now, So kind of status quo on 632 00:31:19,160 --> 00:31:21,200 Speaker 2: the air side still waiting for a little bit more 633 00:31:21,200 --> 00:31:24,000 Speaker 2: of an inflection there. You know, Ocean rates have continued 634 00:31:24,000 --> 00:31:26,000 Speaker 2: to be a little bit better than expected. I think 635 00:31:26,000 --> 00:31:28,680 Speaker 2: that's probably the right way to think about it, as 636 00:31:29,160 --> 00:31:31,960 Speaker 2: the world has reacted to some of the disruptions and 637 00:31:32,040 --> 00:31:34,240 Speaker 2: the supply chain. But the good news I think for 638 00:31:34,880 --> 00:31:37,120 Speaker 2: all the folks like you and I who are consuming 639 00:31:37,160 --> 00:31:40,400 Speaker 2: the products coming over is that the companies have adjusted 640 00:31:40,400 --> 00:31:41,880 Speaker 2: to it, and I think for the most part, we're 641 00:31:41,880 --> 00:31:44,800 Speaker 2: in a more stable environment now where we wouldn't expect 642 00:31:45,160 --> 00:31:49,800 Speaker 2: these re routings to cause meaningful delays or misshipments or 643 00:31:49,840 --> 00:31:50,360 Speaker 2: things like that. 644 00:31:50,560 --> 00:31:54,000 Speaker 1: Yeah, definitely not like we saw during the pandemic, that's 645 00:31:54,080 --> 00:31:57,640 Speaker 1: for sure. So before I let you go, what are 646 00:31:57,680 --> 00:32:00,760 Speaker 1: your favorite names right now? If you want to let us. 647 00:32:00,640 --> 00:32:03,120 Speaker 2: Know, sure, yeah, absolutely, I mean I think you know 648 00:32:03,560 --> 00:32:07,000 Speaker 2: that we continue to look for a bit of an 649 00:32:07,040 --> 00:32:09,800 Speaker 2: early cycle inflection at some point and have some of 650 00:32:09,840 --> 00:32:12,480 Speaker 2: that priced in, so you know, we are constructive on 651 00:32:12,520 --> 00:32:16,680 Speaker 2: the US rails broadly, and we also like the LTL, 652 00:32:16,920 --> 00:32:19,040 Speaker 2: so you know, in the US rails we like, you know, 653 00:32:19,040 --> 00:32:21,160 Speaker 2: we frankly like the US guys. So let's talk about 654 00:32:21,200 --> 00:32:25,120 Speaker 2: you know, csx Norfolk, Union Pacific are on our list here. 655 00:32:25,160 --> 00:32:27,560 Speaker 2: We also like names like XPO. On the trucking side. 656 00:32:27,640 --> 00:32:30,800 Speaker 2: Think that there still continues to be opportunity for those 657 00:32:30,840 --> 00:32:33,120 Speaker 2: to perform, you know, over the longer term as we 658 00:32:33,160 --> 00:32:35,320 Speaker 2: see the cycle stretch out a little bit. Names like JB. 659 00:32:35,440 --> 00:32:37,280 Speaker 2: Hunt and Knight are also up on our list, so 660 00:32:37,320 --> 00:32:39,080 Speaker 2: those are at least a handful of name. I'm not 661 00:32:39,120 --> 00:32:42,120 Speaker 2: sure there necessarily are specific top picks. We kind of 662 00:32:42,120 --> 00:32:44,480 Speaker 2: think a little bit more in sectors and the way 663 00:32:44,760 --> 00:32:46,760 Speaker 2: that we like to have exposure, but those are some 664 00:32:46,800 --> 00:32:48,360 Speaker 2: of the names that we're thinking about right now. 665 00:32:48,920 --> 00:32:51,400 Speaker 1: All right, well, Chris, as always, thanks a lot for 666 00:32:51,440 --> 00:32:54,480 Speaker 1: your time. I really appreciate it and always appreciate your insights. 667 00:32:55,520 --> 00:32:57,080 Speaker 2: It's a pleasurely always happy to come on. 668 00:32:57,120 --> 00:32:59,120 Speaker 1: Thank you so much, all right, and thanks for tuning in. 669 00:32:59,160 --> 00:33:01,960 Speaker 1: If you'd like the episode, please subscribe and leave a review. 670 00:33:02,280 --> 00:33:04,840 Speaker 1: We've lined up a number of great guests for the podcast, 671 00:33:04,880 --> 00:33:09,680 Speaker 1: so check back to hear conversations with C suite executives, shippers, regulators, 672 00:33:09,720 --> 00:33:13,480 Speaker 1: and decision makers within the freight transportation markets. Also, if 673 00:33:13,480 --> 00:33:16,040 Speaker 1: you have an idea for a future episode, please hit 674 00:33:16,080 --> 00:33:19,120 Speaker 1: me up on the terminal or on Twitter at logistics Late. 675 00:33:19,360 --> 00:33:20,960 Speaker 1: Thanks everyone, be safe out there.