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Mr. Bowman is a portfolio manager at Hamilton-based Wickham Investment Counsel Inc., an adviser to high net worth clients. michael@wickhaminvestments.com
What are we looking for?
Some 80 per cent of North American communities receive their goods exclusively by truck, according to the American Trucking Association. The industry collects 83 per cent of shipping revenues, while rail collects only 6 per cent – and trucking revenue is expected to increase 72 per cent by 2018.
Today my colleague Sean Pugliese and I thought we'd take a look at the North American logistics industry.
The screen
We sorted these companies by market capitalization, and all are over $150-million.
The forward price-to-earnings ratio (P/E) for the next 12 months is based on analysts' consensus estimates.
The operating ratio is a key indicator used in the transportation industry, and is the operating expenses as a percentage of the operating revenue. The lower the number, the better.
We have included the analysts' consensus estimates for the target price 12 months out, and the potential total return over that period.
What did we find?
Based in Tampa, Quality Distribution is the largest bulk tank truck company in the North America, and has the best potential total return, and the lowest P/E ratio of the companies shown, but pays no dividend.
The largest by market capitalization, and with 2012 gross revenues of $11.4-billion (U.S.), is Minnesota's C.H. Robinson, which operates on five continents.
Contrans, from Woodstock, Ont., provides shippers with flatbed, van, dry tank, liquid tank, and dump equipment services. The company has a 3.85-per-cent yield and a very respectable P/E ratio.
The smallest company on our list is Trimac, with headquarters in Calgary. The stock yields 5 per cent, has the second-lowest P/E next to Quality Distribution, and a potential total return of almost 22 per cent.
Arkansas Best – at least from an operational perspective – lives up to its name; it is the only six-time winner of the ATA President's Trophy for safety. From an investor's perspective, not so much: It has one of the lowest yields, the highest P/E, the worst operating ratio and one of the lowest potential total returns.
Conclusion
While the above analysis is helpful, let's give the last word to David Bradley, CEO of the Ontario Trucking Association, who recently wrote, "...[T]he trucking industry in both Canada and the United States is facing a long term and chronic driver shortage. At the end of the day, those carriers that have the drivers will win."