FleetOwner
2/11/2008
Equipment pre-buys and disappointing freight volumes in 2006 and
on into 2007 have contributed to trucking companies’ disappointing
earnings and depressed stock prices, argued Gary Ciuba, a managing
director at Stephens Inc. Although early 2007 was a good
environment for going private, market conditions as of late 2007
have dictated a change in strategy, he told Fleet Owner. In the
first five months of 2007, private equity acquired 16 for-hire
carriers, Ciuba said, which was more than for all of 2006. This was
due to high fragmentation and hopeful long-term prospects for
freight transport, as well as a reflection of a recent trend for
public companies in many industries to sell to private equity
groups and investors in all-cash transactions. However, in late
2007 banks began to shy away from lending to trucking concerns
partly due to economic concerns, issues specific to the credit
markets, motor carriers’ falling stock prices and 2006 pre-buys
causing approximately 70,000 to 80,000 too many trucks to be on the
road, Ciuba said.
Ciuba is optimistic about 2008, stating that the freight
environment will likely improve before everyone believes it will.
Ciuba’s advice is to wait out the freight recession if a company’s
balance sheet is strong. But if the trucker is struggling, you
don’t want to be in liquidation. However, selling may be a
necessity for many companies, as Ciuba said that bankruptcies were
up 37% in the second quarter of 2007, and it may not be worth it to
hold out for a better offer that may not come for a while, if at
all.
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