CTT Correios de Portugal has issued a Code of Ethics to be put in practice within the CTT Group. This Code is to be used as a behavioural and management set of principles for all CTT workers in their professional relationships with their peers, leaders, customers or any other stakeholder in order to strengthen the image of CTT.
Read MoreCTT and the Brazilian post, ECT, have signed with the Bank of Brazil an agreement to allow the purchase on line of Brazilian products
Read MoreCTT Correios de Portugal has launched a free digital mail service last June. Thus, 10 million electronic personal postal boxes, one for each citizen, company and institution are available to users who may register themselves by Internet or at any of the 1000 Post Offices in the country.
Read MoreYRCW pre-reported to the upside. Yesterday morning, YRCW pre-reported 2Q EPS in the range of $1.49-$1.54, ahead of Consensus $1.46 and our $1.42 estimate. Excluding a $0.04 loss from reorganization costs and gains on property sales, the new guidance range is $1.53-$1.58, but given YRCW’s continued charges, we do not exclude these losses and we don’t believe consensus excluded them either.
Upside driven by strong industrial economy and regional pricing. The company indicated volume and costs are on plan and yields provided the outperformance, especially from regional operations. Still, the midpoint of the new guidance range is just 3.8% ahead of the current consensus.
Raising 2Q EPS estimate. We are raising our 2Q EPS estimate to $1.54, the high end of mgmt’s guidance including charges and gains on sales, from $1.42, bringing our full year 2006 estimate to $5.23 from $5.11.
The near term environment is positive for LTLs, but operating leverage could be negative if the economy slows. The LTL group is likely benefiting from strength in the industrial sector and high fuel prices. This is also likely to benefit the near term outlook for ABFS, CNW, and ODFL, but for investors concerned about a slowdown in 2007, we note the risk of operating leverage swinging the other direction. Still, we expect a stronger industrial economy than consumer going forward.
YRCW has been extremely inconsistent in achieving guidance. Mgmt has pre-reported 3 of the past 4 quarters, with the prior two to the downside. We expect this volatility to continue because we think the company will continue to struggle operationally, particularly in the regional LTL business. Given the near term economic strength and low end valuation, we expect YRCW to remain in a trading range around $40 near term, and our rating remains Peer Perform.
Road-user charging schemes have been introduced in Switzerland, Austria and Germany. Britain is planning to launch its Lorry Road User Charging (LRUC) system in 2008. The various schemes differ in their objectives, coverage, technology, procedures and toll levels. This paper compares currently operating systems and that planned for the UK. It concludes that the British system will be the most complex and yet, unlike the others, result in a net loss of tax revenue. The paper also assesses the possible effects of lorry road-user charging on a range of logistical variables, including system design, freight modal choice, truck utilisation, vehicle routing and the scheduling of deliveries. It shows how its logistical effects will depend on the nature of the tolling scheme and level of charges.
Read MoreAttractive entry point on the back of market pullback. Although up 5% from the recent trough, TNT shares are down 9% since the beginning of May, in line with our European Logistics stock coverage universe average. We maintain our Outperform on the back of positive fundamentals and believe current share price weakness offers an attractive entry point with 24% upside potential to our price target.
Logistics disposal to serve as next likely key catalyst. Disposal of the Logistics division (ex freight forwarding) is expected before year-end at a price that at least matches book value of €1.2bn ($1.51bn) per TNT guidance. Successful disposal would (1) improve the group’s growth and returns profile and (2) trigger a sizeable share repurchase (estimated 9%-11%, dependent on takeout price).
Long-term focus on Express development. Ex Logistics, the Express division is set to play an even more pronounced role as the group’s growth driver. Besides the successful disposal of Logistics, emergence of accelerating top-line Express growth, in line with medium-term 10%-15% guidance (vs. ~10% guidance for 2006), could serve as a key fundamental catalyst in 2H:06.
Earnings ex logistics unchanged; updating ‘all-in’ estimates. Ex Logistics, we expect EPS of €1.89 ($2.38) and €2.13 ($2.68) in 2006/07 (no change) with our €35 ($42) target price implying a target P/E multiple of 13.8x (2007E) vs. current 11.1x. Due to an update of our Logistics valuation and treatment for discontinued depreciation, our ‘all-in’ estimates (inclusive of Logistics) are rising by 4% (down 4% underlying).
Risks to our bullish thesis. Key risks relate to (1) successful disposal of a large Logistics asset, (2) a major economic slowdown (to which Express would be highly geared), (3) Mail regulatory risk (4) a remaining, albeit small, gov equity stake overhang (10%) and (5) potential suitors interested in Express may choose other means of developing a greater presence in Europe.
No new news is good news
In-line F1Q:07 (April) quarter. UTIW reported $0.17, in-line with its prior pre-report range of $0.15-$0.17. Operating income was modestly higher than we projected benefiting from a penny less stock option expense offset by modestly lower than expected net rev. growth. Other income and share count modestly higher, tax rate modestly lower. Overall right in-line.
Modest positives from report and conf. call. Mgmt stated that it was comfortable with current F2Q and F07 Consensus EPS ests implying that downwardly adjusted EPS ests have likely bottomed. Ocean gross yields expanded 160bp y-o-y well above our expectations – we expect further acceleration in F2Q. New higher margin CL contracts were noted. Market acquisition is on-track. Corporate expenses were lower than expected.
Modest negatives… Receivables spiked but mgmt noted that the material part of that was related to timing for holidays in South Africa and thus far in F2Q working cap has reversed in UTIW’s favor. CL margins and profitability were weaker than expected. Airfreight net rev. grew only about 6% on an est. 13% volume growth. We expect acceleration in airfreight growth as recently hired employees from competitors begin to deliver.
Little new insight in our largest long term concern, contract logistics. UTIW continues to struggle with declining CL margins relating to some recent start-up costs and an unfavorable mix of faster U.S. growth. Large new CL contracts for IHD in S.A. and in China were noted. This is critical as these regions generally have materially better op margins and most recent large CL wins (WMT, HD, Fuji) have been based in the lower margin U.S. market.
Reiterate Outperform. While we don’t see material upside to near term estimates, we also don’t see downside. At current valuations we continue to favor the risk/reward to buy the stock now (aggressively under $30). Longer term this remains one of our favorite managements and models.
Bunge Limited today announced that L. Patrick Lupo, former chairman and chief executive officer of DHL Worldwide Express (DHL), has joined its Board of Directors. The appointment of Mr. Lupo brings the membership of Bunge’s board to 11. Mr. Lupo is an independent director and will serve on the Board’s Compensation Committee and its Finance and Risk Policy Committee.
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