S&P Ratings says freight transportation remains healthy

S&P Ratings says freight transportation remains healthy Credit fundamentals remain favorable for most sectors of air freight, railroad, trucking and transportation leasing companies, according to a report issued by Standard & Poor's Ratings Services in New York.
   The report, which covered 46 rated issuers in North America, Europe and the Asia-Pacific region, noted tight capacity and strong demands as bolstering freight transportation.
   'The North American air freight and railroad sectors are both continuing to benefit from the positive economic environment. Fundamentals for heavyweight cargo carriers are better than they have been in some time, with healthy commercial demand and continuing solid military demand. Railroads are experiencing solid demand in all sectors except for automotive, although high fuel prices remain a challenge,' S&P Ratings Services said in a statement.
   S&P said railroads that are operating efficiency — Canadian National Railway Co. (BBB+/Positive/A-2), Canadian Pacific Railway Co. (BBB/Stable/-), Norfolk Southern Corp. (BBB/Positive/A-2) and Burlington Northern Santa Fe Corp. (BBB+/Stable/A-2) — should benefit most in the immediate future.
   Trucking industry credit fundamentals, for both U.S. less-than-truckload and truckload segments, continue to benefit from 'consistently higher volumes, pricing, and customer mix improvements' for most rated companies, the report said.
   'Contrary to positive trends in most segments of the U.S. trucking industry, the vehicle-hauling segment has been hurt by reduced U.S. automotive shipments, resulting in weaker-than-expected financial performance, constrained liquidity, and minimal headroom under certain covenants, S&P said.
   Demand for leased equipment, primarily railcars and trucks, remains firm, the report said, due to heavy traffic of certain commodities globally and railroad congestion. 'Lease rates have finally begun to recover for the equipment leasing companies, due to rising demand, capacity constraints, higher equipment costs, and the renewal of leases that were signed in a weaker environment,' the report noted.
   Looking abroad, the report said Japan's fragmented trucking industry is expected to become more competitive with the privatization of government-owned Japan Post. Nippon Express Co. Ltd. (A-/Stable/-) and Yamato Transport Co. Ltd. (A/Stable/-) have maintained profitability and relatively better financial positions than their competitors, partly due to higher margin service offerings.
   For the complete report, 'Industry Report Card: Global Air Freight, Railroads, Transportation Leasing and Trucking,' call (212) 438-9823 for purchase information or e-mail research_research@standardandpoors.com.