INTERVIEW TOPIC: Outlook for freight brokers
SPEAKER: Bruce Chan, vice president and senior analyst, Transportation & Logistics Equity Research Group at Stifel
BIO: Chan covers freight forwarding, airfreight, contract logistics, truck brokerage and asset-light trucking. He was named a 2018 Rising Star by Institutional Investor Magazine. Chan has a law degree from the University of Maryland.
TAKEAWAY: Freight brokers’ value proposition is becoming more evident in this period of record tight capacity, connecting shippers in desperate need of transport with a very fragmented market of capacity providers.
“When you think about the changes that are happening in e-commerce, in the supply chain right now, and the technology advances that are coming in play, there’s also a need for a consolidated intermediary to help the fragmented capacity base and shipper base to navigate all these challenges.”
“There’s a lot of confusion about where we are in the freight cycle, and I think a lot of that is because the traditional indicators that we use to forecast may be broken down a bit. We’ve seen a nice level of truck orders, but where are the deliveries? And where are the drivers? We have driving schools that were shut down for a long time, COVID issues that are preventing new drivers from entering the market, and the Drug and Alcohol Clearinghouse that are also presenting some headwinds.”
“We’ve had a couple of head fakes [about the cycle peak]. Then we get the unseasonable Texas snowstorm, $1.9 trillion in stimulus coming down the pike. These are all things that suggest we’re a little earlier in the cycle than common wisdom would dictate. … We are coming up against tougher comps in the back half, but we still have a long way to go in the inventory replenishment cycle to catch up to par. And when you think about the additional demand spike that’s coming, the revenue growth trajectory looks pretty good.”
“Spot pricing has really whipped around and made it difficult for brokers to keep pace and manage stability in those margins. Meanwhile shippers, especially the ones with leverage, are pushing out bids that in some cases are preventing the broker from adjusting their business to respond to the market. But like any other cycle, I think we’ll see that easing of the margin spread. You’ll see brokers recoup that margin on the tail end of the market.”