Transport, logistics weather Sandy well despite glitches
Author: AJOT | Nov 13 2012 at 07:00 PM | Category: Intermodal
U.S. train, truck and logistics companies were among the first to get rolling in the aftermath of Superstorm Sandy thanks to many lessons learned from Hurricane Katrina and other storms, according to industry analysts and executives.
That quick rebound is why the shipping business is expected to be a key driver for the Northeast economy as the region rebuilds.
Customers slammed by Sandy - many still without power and fuel - need deliveries of everything from relief supplies to lumber, machinery and replacement cars.
The need for speed represents an opportunity for trucking and express delivery companies such as United Parcel Service Inc
and FedEx Corp, which began making some deliveries the day after the storm.
“That business in the Northeast is really getting a lift because supply chains have been disrupted and expedited (service) is what you call on when you need to get something somewhere,” said Kevin Sterling, BB&T Capital Markets analyst in Richmond, Virginia.
The expedited shipping services that UPS and FedEx specialize in are premium services that are among the most profitable for the package delivery companies.
Sandy represents a revenue opportunity close to $14 billion for truckers, which will haul in a host of products, including food, batteries, generators and building materials, said Noel Perry, principal of Transport Fundamentals in Cornwall, Pennsylvania.
Perry’s estimate has spiked seven-fold since the end of October as forecasts of the devastation swelled.
“I’d like to be a flatbed guy right now,” Perry said.
Rental trucks are also in high demand, with customers in Sandy’s path replacing damaged vehicles and needing larger fleets to help catch up on business lost during the storm.
Miami-based Ryder System Inc was sending up to 500 rental trucks to supplement the 1,200 rentals it typically has in the storm zone.
Transport company shares have outperformed the broader market in the days after the storm hit.
The Dow Jones Transportation average is down 0.7 percent from the close on Oct. 26, just before Sandy hit. The broader Dow Jones Industrial average has fallen 2.2 percent in that time.
To be sure, delivery companies and railroads took a short-term earnings hit from Sandy. Intermodal volume - the supply of goods moved in containers that can be shifted from train to truck or from ship to train, fell 3.8 percent in the latest week due to East Coast port disruptions, said analyst Fadi Chamoun of BMO Capital Markets.
“We expect volumes to begin to pick up over the next several weeks as major ports such as New York-New Jersey are now back in full swing and are working through the backlogs,” he said.
In addition to backlogs and rebuilding volume, UPS and Fedex the largest package delivery companies, are gearing up for expected double-digit increases in holiday deliveries driven by e-commerce.
Moody’s Investor Service said East Coast freight railroads CSX Corp and Norfolk Southern Corp could have lower cash flows and higher costs in the current quarter, but Sandy will not likely affect long-term operating performance, liquidity or credit ratings.
Freight transportation company triage playbooks have been evolving with a series of disasters, including Hurricane Katrina.
By the time Sandy hit, trucking and logistics companies had topped off gas tanks, bought or rented back-up generators to power distribution and fueling centers, and shipped relief and manufacturing supplies to the Northeast that customers would need after the storm. During the storm and in the days after, these companies and East Coast railroads diverted shipments away from the hardest-hit areas and found alternative delivery options for customers
Wal-Mart Stores Inc, which owns most of its trucking fleet, is among the discount retailers that Moody’s said will benefit from storm recovery and rebuilding efforts.
Walmart has shipped more than 1,900 truckloads into the storm zone, of which 600 were full of emergency products such as gas cans, flashli