Transport, logistics weather Sandy well despite glitches
(Reuters) - U.S. train, truck and logistics companies were among the first to get rolling in the aftermath of Superstorm Sandy thanks to many lessons learned from Hurricane Katrina and other storms, according to industry analysts and executives.
That quick rebound is why the shipping business is expected to be a key driver for the Northeast economy as the region rebuilds.
Customers slammed by Sandy - many still without power and fuel - need deliveries of everything from relief supplies to lumber, machinery and replacement cars.
The need for speed represents an opportunity for trucking and express delivery companies such as United Parcel Service Inc (UPS.N) and FedEx Corp (FDX.N), which began making some deliveries the day after the storm.
"That business in the Northeast is really getting a lift because supply chains have been disrupted and expedited (service) is what you call on when you need to get something somewhere," said Kevin Sterling, BB&T Capital Markets analyst in Richmond, Virginia.
The expedited shipping services that UPS and FedEx specialize in are premium services that are among the most profitable for the package delivery companies.
Sandy represents a revenue opportunity close to $14 billion for truckers, which will haul in a host of products, including food, batteries, generators and building materials, said Noel Perry, principal of Transport Fundamentals in Cornwall, Pennsylvania.
Perry's estimate has spiked seven-fold since the end of October as forecasts of the devastation swelled.
"I'd like to be a flatbed guy right now," Perry said.
Rental trucks are also in high demand, with customers in Sandy's path replacing damaged vehicles and needing larger fleets to help catch up on business lost during the storm.
Miami-based Ryder System Inc (R.N) was sending up to 500 rental trucks to supplement the 1,200 rentals it typically has in the storm zone.
Transport company shares have outperformed the broader market in the days after the storm hit.
The Dow Jones Transportation average .DJT closed at 5018.28 on Friday, down 0.7 percent from the close on October 26, just before Sandy hit. The broader Dow Jones Industrial average .DJI has fallen 2.2 percent in that time.
To be sure, delivery companies and railroads took a short-term earnings hit from Sandy. Intermodal volume - the supply of goods moved in containers that can be shifted from train to truck or from ship to train, fell 3.8 percent in the latest week due to East Coast port disruptions, said analyst Fadi Chamoun of BMO Capital Markets.
"We expect volumes to begin to pick up over the next several weeks as major ports such as New York-New Jersey are now back in full swing and are working through the backlogs," he said.
In addition to backlogs and rebuilding volume, UPS and Fedex the largest package delivery companies, are gearing up for expected double-digit increases in holiday deliveries driven by e-commerce.
Moody's Investor Service said East Coast freight railroads CSX Corp (CSX.N) and Norfolk Southern Corp (NSC.N) could have lower cash flows and higher costs in the current quarter, but Sandy will not likely affect long-term operating performance, liquidity or credit ratings.
Freight transportation company triage playbooks have been evolving with a series of disasters, including Hurricane Katrina.
By the time Sandy hit, trucking and logistics companies had topped off gas tanks, bought or rented back-up generators to power distribution and fueling centers, and shipped relief and manufacturing supplies to the Northeast that customers would need after the storm. During the storm and in the days after, these companies and East Coast railroads diverted shipments away from the hardest-hit areas and found alternative delivery options for customers
Wal-Mart Stores Inc (WMT.N), which owns most of its trucking fleet, is among the discount retailers that Moody's said will benefit from storm recovery and rebuilding efforts.
Walmart has shipped more than 1,900 truckloads into the storm zone, of which 600 were full of emergency products such as gas cans, flashlights, batteries, water and chainsaws.
Plenty of trucks were ready to move the added supplies due to Walmart's crisis preparation and Sandy's pre-holiday timing.
Walmart had rented and pre-positioned five generators and had ready access to fuel at its Sam's Club warehouse locations.
"We really started to formalize our processes after Hurricane Katrina," Bryan Boudreaux, senior vice president of Walmart Supply Chain, Eastern Business Unit. "Unfortunately, because of the wide area that I support and that Walmart has across the United States, we've had plenty of opportunity to update the processes all the time."
Despite all the emergency planning, Sandy unearthed some problems that transport companies will address in crisis planner updates.
Ryder had filled all of the gas tanks that serve lease customers at its locations impacted by Sandy. But next time, Ryder wants to get its generators, needed at some locations to power fueling stations, to the crisis area sooner, said Robert Sanchez, president and chief operating officer.
Ryder, which counts Dunkin' Donuts (DNKN.O) and Staples Inc (SPLS.O) among its customers, said it bought generators after Hurricanes Katrina and Wilma in the Southeast. Ryder this time shipped the generators after Sandy hit, when it evaluated where they would be most needed.
"One of the things we learned for the next time is that we want to get those generators much closer to where the point of impact is going to be, so that after the storm we can get them hooked up and running and maybe buy ourselves another 24 hours that we probably lost in transporting them," Sanchez said.
A downed cell-phone tower in New Jersey caused a half-day communications failure that slightly deferred some UPS business. As a result, UPS plans to more widely deploy high priority call systems managed by the National Communication System, part of the U.S. Department of Homeland Security.
"That is an area that we need to look through, work through and try to create a fallback if communications goes down on a larger scale for a longer period of time," said Dan Gross, vice president of UPS transportation network planning, North America.
(Reporting By Lynn Adler.; Editing by Patricia Kranz and Andre Grenon)
- Judge rejects strict limits on U.S. nurse who treated Ebola patients |
- Test flight of Virgin Galactic spaceship ends in fatal crash in California
- Suspect in Pennsylvania police ambush denied bail |
- Dow, S&P 500 end at record highs; BoJ move adds fuel to rally |
- Judge issues order enforcing Ebola isolation of defiant Maine nurse