Stifel projects low single-digit global trade growth in 2016
Publicly traded freight forwarders reported an average airfreight tonnage decrease of 2.2 percent year-over-year in the fourth quarter of 2015, while ocean freight volumes also declined 2.2 percent during the quarter, according to investment firm Stifel.
Publicly traded freight forwarders reported an average airfreight tonnage decrease of 2.2 percent year-over-year in the fourth quarter of 2015, while ocean freight volumes also declined 2.2 percent year-over-year during the quarter, according to an advisory note from the Stifel Transportation & Logistics Group.
In the airfreight division, gross profit per ton was mixed among the public forwarders, averaging a 0.3 percent increase from the fourth quarter of 2014, with most of the forwarders reporting year-over-year gains. DHL, DSV and Kuehne + Nagel posted increases, while Expeditors International and Panalpina experienced declines.
However, gross profit per TEU in the ocean freight division was strong across the board, averaging a 7 percent year-over-year increase during the quarter, resulting from lower buy rates, said Stifel.
In terms of stock investments, the investment firm said it continues to prefer Seattle, Wash.-based third-party logistics provider Expeditors International and Swiss-based 3PL Kuehne + Nagel.
Expeditors does have a more difficult gross profit, earnings before interest and tax, and earnings per share comps in the first half of 2016, resulting from its larger presence in the Asia-U.S. trade than other public forwarders. However, Stifel still projects that management's growth focus should allow it to take share and drive profitability over the next 12 months.
During the fourth quarter of 2015, Kuehne + Nagel's airfreight tonnage and ocean freight volumes rose 3.5 percent and 3.3 percent year-over-year, respectively. In addition, the company demonstrated good yield improvement and solid tonnage gains during the quarter.
Meanwhile, Stifel believes DSV will be focused on its recent $1.35 billion purchase of UTi Worldwide, which was finalized in January 2016.
DHL experienced an 11.8 percent year-over-year drop in airfreight tonnage during the fourth quarter of 2015, while its gross profit per ton rose 13.4 percent year-over-year from changing its freight mix and adjusting its global network. Panalpina's airfreight tonnage inched up 3 percent from the fourth quarter of 2014, while the company's ocean freight volumes declined 5.3 percent year-over-year.
Overall, ocean freight rates remain plagued by overcapacity, which Stifel said is not optimal for freight forwarders.
"We believe higher ocean freight rates would lead to an increase in forwarder profitability by providing an opportunity to improve gross profit per container," Stifel said.
"Airfreight has also had its issues with overcapacity, because the international passenger traffic market has been growing significantly faster than the air cargo market, adding belly space capacity faster than demand," the firm added.
Looking ahead, Stifel projects very slow, low single-digit global trade growth in 2016, with a suppressed airfreight market in the first quarter of 2016, resulting from high inventory levels and little need for rapid replenishment in the global supply chain.
On the flip side, Stifel said ocean freight industry volumes may rise during the quarter.
In the airfreight division, gross profit per ton was mixed among the public forwarders, averaging a 0.3 percent increase from the fourth quarter of 2014, with most of the forwarders reporting year-over-year gains. DHL, DSV and Kuehne + Nagel posted increases, while Expeditors International and Panalpina experienced declines.
However, gross profit per TEU in the ocean freight division was strong across the board, averaging a 7 percent year-over-year increase during the quarter, resulting from lower buy rates, said Stifel.
In terms of stock investments, the investment firm said it continues to prefer Seattle, Wash.-based third-party logistics provider Expeditors International and Swiss-based 3PL Kuehne + Nagel.
Expeditors does have a more difficult gross profit, earnings before interest and tax, and earnings per share comps in the first half of 2016, resulting from its larger presence in the Asia-U.S. trade than other public forwarders. However, Stifel still projects that management's growth focus should allow it to take share and drive profitability over the next 12 months.
During the fourth quarter of 2015, Kuehne + Nagel's airfreight tonnage and ocean freight volumes rose 3.5 percent and 3.3 percent year-over-year, respectively. In addition, the company demonstrated good yield improvement and solid tonnage gains during the quarter.
Meanwhile, Stifel believes DSV will be focused on its recent $1.35 billion purchase of UTi Worldwide, which was finalized in January 2016.
DHL experienced an 11.8 percent year-over-year drop in airfreight tonnage during the fourth quarter of 2015, while its gross profit per ton rose 13.4 percent year-over-year from changing its freight mix and adjusting its global network. Panalpina's airfreight tonnage inched up 3 percent from the fourth quarter of 2014, while the company's ocean freight volumes declined 5.3 percent year-over-year.
Overall, ocean freight rates remain plagued by overcapacity, which Stifel said is not optimal for freight forwarders.
"We believe higher ocean freight rates would lead to an increase in forwarder profitability by providing an opportunity to improve gross profit per container," Stifel said.
"Airfreight has also had its issues with overcapacity, because the international passenger traffic market has been growing significantly faster than the air cargo market, adding belly space capacity faster than demand," the firm added.
Looking ahead, Stifel projects very slow, low single-digit global trade growth in 2016, with a suppressed airfreight market in the first quarter of 2016, resulting from high inventory levels and little need for rapid replenishment in the global supply chain.
On the flip side, Stifel said ocean freight industry volumes may rise during the quarter.
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