EUR 850.00 For Business Accounts Only

Morningstar | SNDR Updated Forecasts and Estimates from 13 Feb 2019

Schneider National’s flagship asset-based truckload unit is the second-largest provider, following Knight-Swift. In 2016, the firm diversified its trucking unit further into last-mile delivery with the Watkins & Shepard acquisition. The final-mile, white-glove delivery market for heavy goods such as furniture is growing at a faster clip than traditional dry van shipping thanks to highly favorable e-commerce trends. The space is becoming more crowded, but we think management's strong execution capabilities will allow Schneider to gradually capitalize on last mile’s growth prospects. Beyond trucking, Schneider is the third-largest intermodal marketing company by container count, following industry leaders J.B. Hunt and Hub Group. We estimate the firm’s intermodal segment (19% of revenue) is slightly more profitable than Hub's, and we think its network scale bestows sustainable competitive advantages via boosting its value proposition to shippers and the Class I railroads, which provide the underlying line-haul service. Low diesel fuel prices and depressed truckload rates tempered intermodal's discount to trucking in 2016 and 2017. But truckload capacity tightened materially in 2018 on the back of robust demand and widespread electronic logging device adoption among small truckers (ELDs reduce productivity). Thus, shippers reignited their pursuit of multimodal options and truck-to-rail conversion activity improved. We believe truckload market capacity conditions will normalize in 2019, but favorable conversion trends should support 3%-4% industry container volume growth longer term.About 20% of Schneider’s top line stems from asset-light logistics operations, primarily truck brokerage. Schneider is one of only a handful of traditional truckload carriers to have successfully broken into the ranks of the top 20 providers (out of a fragmented industry of thousands)--a space mostly consisting of pure-play third-party logistics providers. We think the firm’s vast network of shippers and asset-based truckers enables it to capitalize on the self-reinforcing network effect in this segment, making it solidly profitable.Schneider took its shares public in April 2017.