Morningstar | LSTR Updated Forecasts and Estimates from 03 Apr 2019
Because of high investor interest, we took another close look at the upstart digital freight-matching companies, or DFMs. A few have changed course, but most are still trying to disrupt the traditional truck brokers, supported by a spike in venture capital funding. Uber Freight, Convoy, and Transfix have emerged as front-runners, at least in terms of gross revenue, but we suspect net revenue run rates remain low and operating margins are negligible. DFMs are trying to penetrate asset-light truck brokerage via highly automated platforms that match shippers and truckers on demand, and we think a few will profitably address a certain niche, eventually. But it remains to be seen what their margin profile will look like, especially for those that are "buying" market share.While a few DFMs have gained impressive top-line traction since our 2017 analysis, investors in legacy U.S. logistics stocks should rest easy that DFMs probably won't disrupt the incumbents. For one, the network effect mounts a powerful defense for several large providers--C.H. Robinson, Echo Global Logistics, and Landstar each have a massive network of shippers and asset-based truckers that forges a robust value proposition. It is small brokers that are at greatest risk for losing share to DFMs. Even so, we think most upstarts will contend with limited buying power and losses until they build greater lane density, even with a lower-cost infrastructure. Additionally, we think most DFMs' sales and service capabilities remain limited, which likely bounds their addressable market, given the service-intensive nature of trucking. Furthermore, the large moatworthy brokers aren't standing still; they already invest heavily in IT and are increasingly automating back-office processes, and most have launched digital platforms. Following a long stretch in overvalued territory, stock prices for many of the logistics names we cover have become more palatable, and XPO Logistics looks modestly undervalued.
Landstar System is an asset-light provider of integrated transportation management solutions. The company provides services to its customers across transportation modes, throughout the U.S. and to a lesser extent in Canada and Mexico, and between the U.S. and Canada, Mexico and other countries around the world. The company has two segments: transportation logistics, which provides truck services, rail intermodal services, as well as air and ocean services; and insurance, which is comprised of Signature Insurance Company, an offshore insurance subsidiary, and Risk Management Claim Services, Inc. The company's insurance segment provides risk and claim management services to certain of its operating subsidiaries.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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