EUR 850.00 For Business Accounts Only

Morningstar | Unusually tight truckload capacity a nice tailwind for Schneider's trucking and logistics segments.

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. Although the space is becoming more crowded, we think plentiful cross-selling opportunities and management's strong execution capabilities will allow Schneider to capitalize on last mile’s solid 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. For much of 2016 and 2017, intermodal grappled with pressure from low diesel fuel prices and depressed truckload rates, which tempered the mode’s cost savings relative to over-the-road trucking. That said, truckload rates have soared over the past several quarters on firming capacity, and we expect truck-to-rail conversion activity, especially in the firm’s Eastern network, to improve throughout 2018 as widespread electronic logging device adoption among truckload carriers keeps over-the-road capacity tight. About 20% of Schneider’s top line stems from asset-light logistics operations, primarily highway brokerage. Schneider is one of only a handful of traditional truckload carriers to have successfully worked their way into the ranks of the top 20 brokers (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 a solidly profitable enterprise.Schneider took its shares public in April 2017.