Trucking Stocks Suffer on Fears of a Slowdown


It's been nearly two years since trucking and air-freight concern Consolidated Freightways split into two publicly traded companies: One that kept the Consolidated Freightways Corp. name, and another named CNF Transportation Inc.

So, how are they doing? Pretty well, if you look at their operations. Pretty bad, if you look at their stocks, because investors are nervous about a slowing U.S. economy.

CNF Transportation, the bigger of the two with revenue of $4.3 billion last year, is a Palo Alto-based provider of regional less-than-truckload, or LTL, trucking services through its Con-Way Transportation unit, air-freight through Emery Worldwide and logistics services through Menlo Logistics.

(LTL carriers pick up small shipments from several shippers and move the cargo via a network of terminals, or hubs. Full-line truckload companies typically carry one customer's freight from origin to destination.)

Consolidated Freightways, based in Menlo Park, is the parent of CF MotorFreight, a nationwide LTL carrier. Indeed, the breakup partly was aimed at avoiding competition between the regional Con-Way and the national CF MotorFreight while they were under the same roof.

It's generally worked so far. In the first half of this year, CNF's net income rose 17% from a year earlier, powered by Con-Way, which analysts say is among the most profitable LTLs in the industry. Consolidated Freightways' first-half earnings jumped 42% from the comparable 1997 period even though its revenue was flat.

Analysts say they expect the companies to chalk up further gains this year. But investors aren't impressed. Both stocks--like those of many other truckers--are in a severe slump, even though they're benefiting from strong demand, low fuel costs, limited exposure to Asia's economic crisis and the companies' own efforts to seek business that provides higher profit margins.

But fears of a U.S. economic slowdown, especially in the truck-dependent manufacturing sector, and the stock market's overall sell-off in recent weeks have pushed the companies' stocks sharply lower. CNF's stock, after enjoying a sizzling gain in 1997, has plunged 36% since mid-July, closing Monday at $28.88, down 75 cents, in New York Stock Exchange trading. Consolidated Freightways shares, which trade on Nasdaq, have been sliding for much of the year and have plummeted 55% since mid-April. The stock closed Monday at $8.38, down 13 cents.

CNF maintains that its "stock price does not reflect the earnings" of the company, said spokesman James Allen. He said "there's no fundamental developments" that would account for the drop, but that "we feel the stock is being dragged down" along with the whole sector "of cyclical transportation stocks."


Big Brown in Black: Speaking of trucks, it's been a year now since United Parcel Service of America Inc. endured a 15-day strike by delivery drivers and other workers, and its U.S. business still isn't back to its pre-strike levels.

Yet UPS is a more profitable company. Thanks to increased volumes of higher-priced services, cost-cutting and the reduction of several thousand employees, UPS' earnings are sharply higher in 1998. The lower worker count reflects the fact that many employees didn't return after the strike.

In the six months ended June 30, UPS' net income jumped 43% from a year earlier, to $810 million, even though revenue rose just 4%, to $12 billion. But UPS doesn't have to worry whether its gains impress Wall Street. Atlanta-based UPS is a closely held company owned mostly by employees and retirees.


Pact in the Right Direction: Trying to fix the labor woes that have contributed to slippage in its profit, service record and stock price, America West Airlines took a big step toward ending a protracted dispute with its mechanics' union.

The Phoenix-based carrier said it reached tentative agreement on a new five-year contract with the International Brotherhood of Teamsters, which represents the airline's 400 mechanics.

So far, though, investors aren't impressed. America West's stock has continued sliding in recent days, and it fell again, by 88 cents, to $12.56, Monday on the Big Board.


James F. Peltz can be reached via e-mail at

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