Seeking Alpha: XPO's Painful Climb Toward The Top

It has been a little over a year since I last wrote on XPO Logistics (NYSE:XPO), and I'd like to say that time flies when you're having fun, but that's not the case. As it concerns XPO, the company has used that intervening time to take a very big step toward its goal of being a market share leader along the waterfront of logistics and freight service, but at the cost of significant investor angst and a sharp re-evaluation of the "right" multiple for the business.

The share's value has fallen close to 40% since I last wrote, and my $50-plus fair value at that time was predicated on the company remaining a growth-oriented asset-light third-party logistics company. Instead, the company has pivoted toward a much more balanced asset-heavy/asset-light mix. While that isn't necessarily a bad strategic move, it does change the long-term complexion of free cash flow generation, the volatility of those cash flows, and the multiple the market will be willing to pay for the shares.

There seems to be a recurrent communication issue between the Street and the company, and that concerns me. I don't know if it stems from management being more freewheeling and flexible in its long-term plan than previously thought, or whether there's more of a "making it up as we go along" element to it. In any case, while I do see meaningful value here, management has a lot of work to do to reassure investors about its long-term strategy and about the true synergies of mixing asset-heavy and asset-light businesses in the transportation and logistics space.

Read the full article here:
XPO's Painful Climb Toward The Top

Investopedia: J.B. Hunt - Doing More With Less Trucking

It isn't a good sign for the truckload freight industry, when a company like J.B. Hunt (Nasdaq:JBHT) is doing better largely by getting away from the traditional trucking business, as fast as it can. While there will always be a place for trucking in the U.S. transportation system, this company is betting its future prosperity on less traditional operations, like intermodal and customized service offerings. 

Mixed Third Quarter Results  
J.B. Hunt's third quarter results were not bad, but they also were not as good as they may appear, at first look. Revenue rose 19%, with more than 40% of that growth coming from fuel surcharges. Growth was led by the intermodal segment (the company's largest), where revenue rose 24% on a 15% overall increase in load volume. The dedicated services and integrated solutions segments grew nicely, as well, with 16 and 21% growth, respectively. The truck segment was the laggard, growing just 2% on a reported basis, but actually shrinking 5% net of surcharges, on a 7% decline in tractors on the road.

To read more, please follow this link:
http://stocks.investopedia.com/stock-analysis/2011/J.B.-Hunt---Doing-More-With-Less-Trucking-JBHT-HUBG-CHRW-ODFL-WERN-BRK-A-NSC1020.aspx

Investopedia: UTi Seems To Be Pricing In The Bad News

As investors increasingly fret about the health of the global economy and the likelihood of another recession, the transports have started to flash some warning signs. Railroad companies like Union Pacific (NYSE:UNP) and CSX (NYSE:CSX) have seen carload traffic slow, while drybulk and container shipping companies see rates carve out new bottoms.

Curiously, the stocks of asset-heavy companies like rails and air freight have held up better than many of the asset-light logistics and freight-forwarding companies. That seems to be particularly true for UTi Worldwide (Nasdaq:UTIW). While margins and competition have long been a bear story for this supply chain service provider, investors may wonder if the stock's relatively poor performance within the transports is a sign of bad news to come or an opportunity for a relative value call.



Click the link for the full piece:
http://stocks.investopedia.com/stock-analysis/2011/UTi-Seems-To-Be-Pricing-In-The-Bad-News-UTIW-EXPD-CHRW-UPS-FDX-UNP-CSX0905.aspx

Investopedia: The Logic Of Logistics Stocks

A great deal of ink is routinely spilled on the virtues of inventing a better mousetrap or finding a better way to make that mousetrap. It is less common, though, to see the same attention given to figuring out better ways to get those mousetraps onto store shelves. While most investors are likely quite familiar with the railroad and trucking industries, and their links with a recovering economy, the same may not be true for those companies that specialize in third-party logistics and serve as intermediaries between the producers and shippers.

To that end, then, it is worth exploring whether the logistics industry is a good investment destination in today's market.

The Industry
As a very simplified explanation, these companies thrive by stepping between shipping customers and shipping providers and making life easier for both. Handling the logistics and shipping can be a major headache for companies, particularly smaller operators, and shippers can charge punishing rates for deliveries that are inconvenient or inefficient for them. On the other hand, transportation companies really do not relish the headaches and hassles of dealing with thousands of customers and having to tend to their specific needs.

Enter the third-party logistics specialists. These companies can not only consolidate shipments and negotiate bulk discounts, but they can handle many of the details that bedevil smaller customers. On the flip side, they offer the large rail, trucking and freight concerns a large consistent customer with a thorough understanding of the business and a minimal need for hand-holding. Producers save money, transporters save money and the companies in between make money.

The Companies 
C H Robinson Worldwide (Nasdaq:CHRW) is the largest domestic truck broker in the U.S., and gets about three-quarters of its revenue from truck brokerage. The company is also looking to expand into the growing international air and ocean freight forwarding business. This should reduce some of the cyclicality of the business.

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The link below leads to the full piece:
http://stocks.investopedia.com/stock-analysis/2011/The-Logic-Of-Logistics-Stocks-CHRW-EXPD-HUBG-LSTR-ECHO-UTIW0107.aspx