Today's Pickup: truckload business booming, no warning signs yet

 (Photo: Truckstockimages.com)

(Photo: Truckstockimages.com)

Good day,

The trucking business is great right now, reports Donald Broughton from the DAT Executive Symposium in Pinehurst, North Carolina. Broughton published a roundup of trucking executives’ perspectives this morning: the overarching theme is that “2018 is exceeding all expectations, on number of transactions, on revenue, on margin per transaction. Can’t stay this good forever, but don’t see anything to create downturn, at least not yet.” 

Freight markets are so strong, that even with an influx of cash from the Trump tax cuts, it’s hard to find good acquisitions—potential targets have really high valuation expectations based on their wide margins in this climate. Broughton reported that one anonymous executive said, “We continue to focus on technology and automating process.  The right thing to do at this part of the economic cycle.  Everyone is obsessed with figuring out when the cycle ends but none of the traditional red light warning signs, not even yellow warning signs, are out there.” Several other executives said that they were focused on using technology to drive efficiencies internally and reduce transaction costs.

Did you know?

The U.S. imports $2.36 trillion worth of goods a year. It imports about $29 billion worth of steel and roughly $13 billion worth of aluminum annually. That accounts for less than 2% of total imports and just 0.2% of total economic output.

Quotable:

“What's not to like? They're generating cash flow, volumes are strong, the environment is highly accommodating and they have declining capital expenditures. I think those three dynamics are very positive for equity valuations.”

-Amit Mehrotra, of Deutsche Bank, on Union Pacific’s Investors’ Day

In other news:

How high will truckload rates go?

“Spot rates could stay above contract prices for a few months or even two or three quarters in one or more truckload freight segments,” said Donald Broughton. He noted that for the first time ever, spot rates in January were above contract in all three freight segments — dry van, reefer, and flatbed. (DAT Blog)

Hyundai Merchant Marine will build 20 new containerships at 3 Korean yards

HMM said it has selected Hyundai Heavy Industries for eight 14,000 TEU vessels, Daewoo Shipbuilding & Marine Engineering for 7 23,000 TEU ships, and Samsung Heavy Industries for 5 23,000 TEU ships. (Splash247)

China says in principle door is open to talks with U.S. on trade

China’s door to talks is open in principle, the country’s Foreign Ministry said on Monday, a day after Beijing warned that any trade and business deals reached with Washington would be void if the United States implemented tariffs. (Reuters)

World stocks rise in synchrony after U.S. jobs report

The Stoxx Europe 600 rose 0.5% in morning trading Monday while markets in Hong Kong and Japan rose 1.7% and 1.4% respectively. Futures pointed to a 0.3% opening advance for the S&P 500. (Wall Street Journal)

The $4.9B railroad being built by a pension fund

Caisse de Depot et Placement du Quebec is constructing a railway for Montreal. It's already in talks for similar projects in the U.S. (Bloomberg)

Final Thoughts:

Manufacturing activity continues to expand in the 2nd quarter, reports Ibrahiim Bayaan, and challenges with finding employees and tight freight capacity have made it difficult for producers in the economy to keep up with strong demand.

Data from the Institute of Supply Management (ISM) showed that US factory activity expanded at a faster pace in May, as the manufacturing purchasing manager’s index rose 1.4 points to 58.7. This slightly beat consensus expectations of an increase to 58.5 and marks the 21st consecutive month of expansion in the manufacturing sector.

Hammer down everyone!

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