As of 2018, according to SelectUSA.gov, United States Business Logistics Costs was $1.6 trillion because “multinational firms position themselves to better facilitate the flow of goods throughout the world’s largest consumer market” . In 2019, Trucking generated $791.7 billion in gross freight revenue and 11.84 billion tons of freight, representing 80.4% and 72.5% of the nation’s freight bill and total domestic tonnage shipped, respectively, according to the American Trucking Association Chief Economist, Bob Costello . Since January 2011, the industry has experienced a 16.2% rise in employment, and as of January 2021, it employed 1.4 million Americans, according to the Bureau of Labor Statistics . As a critical component of American consumerism, the trucking industry is significant in connecting the right buyers with the right sellers. Yes, the internet has allowed narrow choices and particular niches, but the product has to come in the buyer’s possession. An argument proposed is American consumerism relies upon a substantially significant and reliant trucking industry.
I then narrowed my choice to IPO Date – in the last five years, which rendered two companies – Schneider National Inc (NYSE: SNDR) and U.S. Xpress Enterprises Inc (NYSE: USX). Scheider National Inc seemed the more attractive opportunity to invest out of the two since it offered to invest in a part of an American company whose founder was inducted into the Green Bay Packers Hall of Fame in 1992 .
Founder of Schneider National Inc, Al Schneider, bought his first truck in 1935 and built a “North American Network” with 85+ years of operation delivering “creative, tech-forward, optimized supply chain solutions” . After 82 years of family ownership, the company listed 28.9 million shares in the New York Stock Exchange in its IPO debut on April 6th, 2017 . The company has only witnessed a 30% increase in its share price since its debut compared to the 70% in the S&P 500. It has been reducing its long-term debt and bolstering its retained earnings since 2016, according to annual financial data available from finra-morningstar.com. A review of the company in the Key Ratios tab highlights maintenance of Gross Margin % while increasing Free Cash Flow and Book Value per share.
The trucking and logistics industry is not an industry that survives on debt. It needs a steady flow of cash to operate, and a good measure I used to gauge the industry was the Days Sales Outstanding measure provided under efficiency ratio. Days Sales Outstanding is defined as the “average number of days it takes credit sales to be converted into cash,” according to the Corporate Finance Insitute. Below is Days Sales Outstanding data for the Trucking industry participants from finra-morningstar.com.
Upon review, one can notice that Schneider National had a better Days Sales Outstanding number compared to the 2020 average. Moreover, out of the nine companies that display a 5Y Days Sales Outstanding average less than the cumulative 5Y Days Sales Outstanding average, Schneider is the third-largest company based on Market Capitalization. Community Snapshot 2020, published by the Greater Green Bay Chamber, listed Schneider National as the fourth largest employer in the Greater Green Bay area over companies such as United Healthcare, Walmart, and Procter & Gamble . With over 2600 employees or approximately 17 percent of their workforce based out of the Greater Green Bay area , and about 22 percent of their workforce having a military background , Schneider National provides an aggressive narrative to counter their carbon impact, as well.
Trucking is currently a carbon-heavy industry, and on March 3rd, Schneider National provided a lens to understand how the company is going to approach that problem. The company commits to reducing carbon emissions by 60 percent per mile by 2035, achieving net-zero status for all company-owned facilities by 2035, and has piloted the use of eCascadia truck built by Freightliner in California . With over 85+ years in operation, 36,900 company trailers, 22,300 company intermodal containers, 20,600 intermodal chassis, and 200 Fortune 500 companies as customers, Schneider National moves millions of tonnes of freight every day . In their Q4 2020 Investor Presentation, the company provides an overview of its customer base, which consists of diverse end-points.
For the Fiscal Year 2020, the company reported $4.5 billion in revenues (a 4% decrease from 2019), a 38% and 44% increase in income from operations and net income, and $1.25 for adjusted diluted earnings per share with the outlook to earn $1.45 to $1.60 for the Fiscal Year 2021 . Setting aside the fundamentals of the stocks and the narrative provided by the company, I committed more or less to invest in the company because the company is a historic American brand that provides a valuable service within the marketplace.
The arrival of goods at endpoints is essential for the chain of consumerism to continue. If a booming economy is suggested as per the economic zeitgeist, trucking companies could benefit from that boom. Regardless of what the current climate looks like, the information provided by the company helped confirm it as something I would like to hold for the long term if it plays out well. In the meantime, I wanted to participate in a valuable spoke in the “trucking” wheel. While I would have liked to own shares of Old Dominion Freight Line, Inc (NASDAQ: ODFL), I own shares of ODFL indirectly through my participation in particular funds that track the S&P 500 (ODFL is a component of the S&P 500).
Author’s Note- The data shared in the essay reflects the results rendered until the date of publication. As of publication, I own shares of Schneider National (entry – Apr 2020). Historical performance only serves as an indicator and teacher, not a predictor. The thoughts expressed are my personal opinions and cannot be equated to personal advice. I constructed this essay for informational and educational purposes only. I encourage all readers to perform their due diligence before investing.