Con-way (CNW) has expanded its operations at a compounded annual growth rate (or CAGR) of 4.1% over the past five years. The company registered total revenues of $5.8 billion in 2014.
Conway’s freight, logistics, and truckload divisions have expanded at CAGRs of 3.6%, -1.1%, and 1.3%, respectively, over the past three years.
The freight division has expanded on higher yield, innovative offerings on less-than-truckloads, and more service centers. The truckload division grew at a slower pace during the same period on account of lower fuel surcharge revenues and a decrease in loaded miles.
The operating incomes for the three divisions have expanded at CAGRs of 21%, -22%, and -4%, respectively, over the same period. The company’s net income has expanded at a faster pace of 14.5% on lower interest and depreciation costs.
The freight division’s margins have improved due to revenue management and linehaul-optimization initiatives.
The logistics division’s operating income has been negatively impacted by warehouse-related operating costs for certain warehouse management contracts. This has been partially offset by improved margins from transportation management services. Overall, margins have fallen for the logistics division, resulting in lower profitability for the company.
The truckload division’s operating income benefited from decreased operating expenses and increased freight revenue per loaded mile. Con-way is focusing on reducing expenses over the next two years in order to maintain and improve its margins.
XPO Logistics (XPO) will benefit from Con-way’s existing network. XPO is expected to generate synergies of $180–$210 million over the next two years.
Con-way achieved an operating margin of 4.6% in 2014. In comparison, its peers reported the following operating margins:
- YRC Worldwide (YRCW): 0.9%
- ArcBest (ARCB): 2.6%
- Old Dominion Freight Line (ODFL): 15.8%
- SAIA (SAIA): 6.7%
Together, these companies form 0.59% of the First Trust Mid Cap Core AlphaDEX ETF (FNX).