I had a great week visiting with many logistics providers and trying to get insight into just exactly what is going on in this business. Some will tell you the business is collapsing due to low demand, some believe the transportation business is ripe for a great uptick in profitability due to constrained capacity (the jury is still out, in my mind, on whether this is artificial or not), some believe it is all just the same.. we are moving around the margins.
I get conflicting signals. For example, everyone tells me the driver shortage is wildly acute and we run the risk of just not having enough capacity to service the industry because of a lack of drivers. Many say if the GDP stays above 2.5% or greater then we will just not have enough capacity to service the shipper market. However, using "Econ 101" this would tell me driver wages should be increasing. That is not the case. Driver wages are flat.
The next question is whether the increase in intermodal actually is absorbing the otherwise demand for driver capacity? This seems to be a plausible answer. Container capacity is up 10% to 20% (depending on who you talk to) and this means those containers have to be filled. They will not let them just pile up in a container yard. Add to the fact that many shippers are lowering their point of indifference of choosing between trucks and IM (Indifference is the length of haul in miles where a shipper sees the two as interchangeable) and more shippers are choosing IM on more lanes. Obviously, this reduces the need for drivers on long haul runs.
So, data is really mixed. The analysts are all saying most of these companies (public) are "fairly valued" and the industry should not be overweighted in a stock portfolio. Projections for pricing have been reduced (early this year most were claiming a 4% price increase but that does not seem to be happening) and capacity has freed up.
The one caveat? Last year we were saying this same thing and the market for trucks and transportation went on fire in the first quarter. So, this post did not give you an answer (sorry) but may have provided some things to think about.