On May 21, The Wall Street Transcript interviewed John L. Barnes III, Managing Director of BB&T Capital Markets Equity Research covering the airfreight/surface transportation sector,
including railroad, truckload and less-than-truckload carriers as well as
freight forwarding, third-party logistics and dedicated cargo/integrated parcel
carriers. Key excerpts, including his favorite barge sector pick, follow:
TWST: American Commercial Lines (ACLI) is a name I am not familiar with. What makes it appealing?
Mr. Barnes: Their dry barge business. They are the number one or two player on the dry barge side and they are the second largest player on the liquid barge side. Right now, what is attractive about the barge industry is that there have been six consecutive years of net capacity reductions. We have seen a very strong pricing market for the barge industry, and we think that is going to continue - very similar to what the rails are seeing in terms of their pricing story.
TWST: Why the decline in capacity?
Mr. Barnes: For about a 10-year period, there was far too much capacity chasing too little freight, and the industry finally attracted some fairly smart people who walked in and said, "This can't last forever." This is an industry that needs to have a lot of equipment taken out. They finally reached a point where a lot of that equipment that had been thrown into the market in the early 1980s as part of investment tax credits finally hit the end of its useful life, and it became very easy to strip that capacity out. Given where the industry was at the time, nobody really had the capital to reinvest. So five years later, you have a very healthy industry that is improving.
ACLI 1-yr chart