Stifel: Global forwarders dividing into haves and have-nots
Investment bank's transportation and logistics group found the six publicly traded forwarders split among those focused on margin and those struggling with IT and cultural issues.
In a recent research note, Stifel said Expeditors International, Kuehne + Nagel, and DSV have outperformed counterparts Panalpina, Deutsche Post DHL, and UTi Worldwide.
Expeditors was the only forwarder among the group to grow air or ocean volumes double-digits year over year - growing 13 percent and 12 percent, respectively - in the first quarter of 2015.
“Expeditors International benefits when supply chains get thrown out of whack,” Stifel said, “due to its uniform, high-quality global IT operating system used by good people who execute on efficient processes and are well-incentivized to not only handle the freight properly but profitably as well.”
Meanwhile, K+N was praised by Stifel for focusing on high margins in its forwarding division, while DSV was also cited for its emphasis on margin and gaining market share.
“It would not surprise us for (DSV) to make a splash with a significant purchase in 2015,” Stifel said.
On the other side of the coin, UTi “is struggling to get traction again after mass disruption as a result of its Transformation (internal program) – simultaneous disruption in systems, personnel, and processes, which led to poor margins and forced the company into a dilutive refinancing a little over a year ago. With former (chief operating officer) Ed Feitzinger, stepping in roughly six months ago for Eric Kirchner as CEO, UTi is attempting to stop the bleeding and focus on regaining stability.”
DHL is less reliant on forwarding revenue that other publicly-traded forwarders, but Stifel said the segment is still serving as a “drag” on overall corporate earnings in the near-term.
Finally, Stifel said Panalpina has been hurt more than the other public forwarders by a decline in energy prices and business in recent times, and that “new leadership has driven significant turnover in personnel and changes to processes and systems, which take time to stabilize/improve. Since the company is not dealing with as many systems and cultural issues as DHL or UTi, we believe its transition period should be less volatile.”
As for the global trade market underlying the forwarding business, Stifel said it continued to expand in the first quarter of 2015 compared to the first quarter of 2014.
“Airfreight led the way in terms of volume gains, and not just in the transpacific eastbound lane due to U.S. West Coast port congestion issues,” the group said. “Ocean freight remains mired in its own predicament, as slow global trade growth is exceeded by vessel capacity growth, pressuring carrier and forwarder profitability.”