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Airfreight, Airlines, Logistics, & Maritime Industry

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Airfreight, Airlines, Logistics, & Maritime Industry Airfreight, Airlines, Logistics, & Maritime Industry August 2016 Jack Atkins Managing Director Stephens Inc. (501) 377-2298 [email protected] © 2016 Stephens Inc. The analyst primarily responsible for the preparation of the content of this presentation certifies that (i) all views expressed in this presentation accurately reflect the analyst’s personal views about the subject company and securities, and (ii) no part of the analyst’s compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the analyst in this presentation. See important disclosures and analyst certification on page 27 of this presentation. This presentation constitutes a compendium report (covers six or more subject companies). As such, Stephens Inc. chooses to provide specific disclosures for the companies mentioned by reference. To access current disclosures for the companies in this presentation, clients should refer to https://stephens2.bluematrix.com/sellside/Disclosures.action or contact your Stephens Inc. representative for additional information. 111 Center Street Little Rock, AR 72201 / 501-377-2000 / 800-647-9691 / stephens.com / Member NYSE, SIPC Stephens Transportation Coverage List Jack Atkins, Analyst Airfreight & Logistics [email protected] 501-377-2298 Company Name Ticker Page # Atlas Air Worldwide Holdings, Inc. AAWW 6 Air Transport Services Group, Inc. ATSG 7 Airfreight Expeditors International of Washington, Inc. EXPD 8 FedEx Corporation FDX 9 United Parcel Service, Inc. Class B UPS 10 American Airlines Group, Inc. AAL 12 Delta Air Lines, Inc. DAL 13 Airlines Southwest Airlines Co. LUV 14 United Continental Holdings, Inc. UAL 15 C.H. Robinson Worldwide, Inc. CHRW 17 Echo Global Logistics, Inc ECHO 18 Forward Air Corporation FWRD 19 Logistics Landstar System, Inc. LSTR 20 World Fuel Services Corporation INT 21 XPO Logistics, Inc. XPO 22 Kirby Corporation KEX 24 Maritime Matson, Inc. MATX 25 Brad Delco, Analyst Justin Long, Analyst Truckload & Less-Than-Truckload Railroads & Transportation Equipment [email protected] [email protected] 501-377-8057 501-377-2036 Company Name Ticker Company Name Ticker ArcBest Corporation ARCB American Railcar Industries, Inc. ARII Celadon Group, Inc. CGI Canadian National Railway Company CNI Covenant Transportation Group, Inc. Class A CVTI Canadian Pacific Railway Limited CP Heartland Express, Inc. HTLD CSX Corporation CSX J.B. Hunt Transport Services, Inc. JBHT Dana Holding Corporation DAN Knight Transportation, Inc. KNX Fortress Transportation & Infrastructure FTAI Marten Transport, Ltd. MRTN FreightCar America, Inc. RAIL Old Dominion Freight Line, Inc. ODFL GATX Corporation GATX Rush Enterprises, Inc. Class A RUSHA Genesee & Wyoming, Inc. GWR Saia, Inc. SAIA Greenbrier Companies, Inc. GBX Swift Transportation Company Class A SWFT Hub Group, Inc. HUBG USA Truck, Inc. USAK Kansas City Southern KSU Wabash National Corporation WNC NN, Inc. NNBR Werner Enterprises, Inc. WERN Norfolk Southern Corporation NSC Ryder System, Inc. R Stoneridge, Inc. SRI Trinity Industries, Inc. TRN Union Pacific Corporation UNP WABCO Holdings Inc. WBC Wabtec Corp. WAB 2 Valuation Table: Airfreight, Airlines, Logistics, Maritime (Dollars in Millions, Except per Share) Price Price Equity Ent. Operating EPS P/E Multiple EV / NTM Rating Target 8/12/16 Value Value 2016E 2017E 2016E 2017E EBITDA Multiple Airfreight United Parcel Service, Inc. Class B UPS EW $110.00 $109.91 $98,275 $107,795 $5.80 $6.10 18.9x 18.0x $10,657 10.1x FedEx Corporation FDX OW 195.00 165.50 47,314 53,366 12.00 13.15 13.8 12.6 8,527 6.3 Expeditors International of Washington, Inc. EXPD EW 53.00 51.28 9,466 8,485 2.37 2.53 21.6 20.3 749 11.3 Atlas Air Worldwide Holdings, Inc. AAWW EW/V 41.00 34.68 864 2,611 4.56 --- 7.6 --- --- --- Air Transport Services Group, Inc. ATSG EW 16.00 14.25 928 1,268 0.69 1.01 20.8 14.1 249 5.1 Mean 16.5x 16.2x --- 8.2x Median 18.9x 16.1x --- 8.2x Airlines Delta Air Lines, Inc. DAL OW $56.00 $36.35 $28,258 $34,945 $5.88 $6.20 6.2x 5.9x $9,609 3.6x American Airlines Group, Inc. AAL EW 41.00 34.92 20,711 45,014 5.52 5.29 6.3 6.6 8,448 5.3 Southwest Airlines Co. LUV OW 52.00 36.52 23,677 25,275 3.73 4.20 9.8 8.7 5,714 4.4 United Continental Holdings, Inc. UAL EW 54.00 47.10 16,939 28,653 8.00 7.00 5.9 6.7 7,025 4.1 Mean 7.0x 7.0x --- 4.4x Median 6.3x 6.7x --- 4.3x Logistics C.H. Robinson Worldwide, Inc. CHRW EW $68.00 $69.68 $10,008 $10,766 $3.62 $3.57 19.2x 19.5x $908 11.9x XPO Logistics, Inc. XPO UW 24.00 36.20 5,806 10,892 0.95 1.78 38.0 20.3 1,386 7.9 World Fuel Services Corporation INT EW 49.00 45.37 3,209 3,268 2.69 3.20 16.8 14.2 368 8.9 Landstar System, Inc. LSTR EW 69.00 68.22 2,897 2,801 3.07 3.47 22.2 19.7 265 10.6 Forward Air Corporation FWRD OW 54.00 45.83 1,412 1,447 2.31 2.65 19.8 17.3 162 8.9 Echo Global Logistics, Inc ECHO OW 31.00 25.86 773 933 1.23 1.45 21.0 17.9 88 10.6 Mean 22.9x 18.1x --- 9.8x Median 20.4x 18.7x --- 9.7x Maritime Kirby Corporation KEX OW $63.00 $53.93 $2,885 $3,606 $2.45 $2.30 22.0x 23.4x $421 8.6x Matson, Inc. MATX OW 45.00 36.55 1,591 2,034 2.02 2.40 18.1 15.2 308 6.6 Mean 20.1x 19.3x --- 7.6x Median 20.1x 19.3x --- 7.6x Note: Equity value calculated from diluted shares outstanding using the treasury method. Note: Airlines (AAL, DAL, LUV, UAL) represent EV / NTM EBITDAR multiples. Note: Airline Enterprise value includes capitalized rent @ 7x operating rent Source: Stephens estimates and FactSet Research Systems 3 Stock Performance & Valuations 2016 Stock Performance -4% Stock Performance Relative to the S&P 45% 35% 35% 26% 25% 20% 15% 11% 9% 7% 7% 5% 4% 5% -5% 0% -4% -15% -21% -25% -22% -23% -24% -25% YTD StockPerformanceYTD 500 S&PRelative to -35% -35% -45% INT FDX LUV UPS KEX AAL UAL DAL XPO LSTR EXPD ATSG MATX ECHO FWRD CHRW AAWW NTM P/E Valuation Multiples 25x 20x 15x 10x 5x 0 x AAL AAWW ATSG CHRW DAL ECHO EXPD FDX FWRD INT KEX LSTR LUV MATX UAL UPS Current NTM Multiple 5-Yr. Avg. NTM Multiple Source: Stephens estimates and FactSet Research Systems 4 Global Airfreight Industry Overview Key Themes International Air Transport Association 25% . Sluggish Demand. For much of the past five 20% years (excluding 2014), global airfreight 15% demand growth has been tepid, growing in the 10% low-single digit range. While core growth is 5% expected to remain challenging, we expect the 0% continued adoption of the e-commerce channel (5%) by consumers to provide a tailwind for the (10%) (15%) industry over the next several years. 2008 2009 2010 2011 2012 2013 2014 2015 YTD • Overcapacity. Excluding 2014, global airfreight FTK ATK capacity growth has outpaced global demand Association of Asia Pacific Airlines growth, largely due to the delivery of new passenger aircraft. The current low fuel price 30% 75% environment has also contributed to additional 70% capacity growth through the activation of older, 20% less fuel efficient aircraft. 65% 10% 60% • Rates. The excess capacity in the market 0% coupled with low fuel prices is weighing on spot 55% market carrier rates. We expect this pressure to (10%) 50% continue without a material pick-up in global 2008 2009 2010 2011 2012 2013 2014 2015 YTD demand. FTK ATK Load Factor Drewry Shanghai to Los Angeles Rate Hong Kong International Airport Cargo Data 450,000 25% $6.00 40% 400,000 20% 15% $5.00 350,000 0% 300,000 5% $4.00 -20% 250,000 -5% $3.00 200,000 -40% -15% 150,000 $2.00 -60% 100,000 -25% Price/Kilo Y/Y Change Loaded Unloaded Total Y/Y % Change Global Semiconductor Shipments 15% 10% 5% 0% -5% -10% Jul-12 Jul-15 Jul-11 Jul-13 Jul-14 Jan-11 Jan-12 Jan-14 Jan-16 Jan-13 Jan-15 Sep-12 Sep-14 Sep-11 Sep-13 Sep-15 Nov-11 Nov-13 Nov-12 Nov-14 Nov-15 Mar-11 Mar-13 Mar-16 Mar-12 Mar-14 Mar-15 May-13 May-15 May-11 May-12 May-14 Global FTKs Global Semi Shipments Source: IATA, AAPA, Drewry, HKIA, Semiconductor Industry Association 5 Equal-Weight/Vol. Rated Atlas Air Worldwide Holdings (AAWW) $41 Price Target (Dollars in Millions, Except per Share) Stock Profile Key Points Ticker AAWW . Highly Levered to Oversupplied Airfreight Price (as of 8/15/16) $ 34.68 Market. A significant portion of AAWW’s Fully Diluted Shares Out (mil.) 24.9 revenue (~50%) is generated from its Charter 52-Week High $ 57.77 business. This business is sensitive to global spot airfreight rates and can materially impact 52-Week Low $ 31.99 quarterly results. Market Cap (mil.) $ 864.1 . Significant Seasonality Reduces EPS Visibility. Net Debt 1,747.1 Historically, AAWW generates a majority of its Enterprise Value $ 2,611.2 annual EPS in the 2H of the year due to the timing of peak season, which decreases the Average Daily Volume 247,988 visibility of earnings.
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