Leverage Position of US Truckload Carriers after 3Q17



Net debt-to-EBITDA multiple

After looking at the 3Q17 adjusted earnings for US truckload carriers, now let’s evaluate their debt levels. In this series, we’re covering JB Hunt Transport Services (JBHT), Landstar System (LSTR), Werner Enterprises (WERN), Ryder System (R), and Heartland Express (HTLD). Let’s also assess their debt servicing ability. We’ll also consider their net debt to-EBITDA (earnings before interest, tax, depreciation, and amortization) multiples. Net debt is derived by subtracting the cash and cash equivalents from the total debt.

EBITDA represents the earnings from core business operations. EBITDA helps us compare companies with uneven capital structures and taxation practices.

Why Ryder has the highest multiple among its peers

As you can see in the above chart, Ryder System (R) has the highest net debt-to-EBITDA multiple of 3.0x in the peer group. It has a forward EBITDA of ~$1.8 billion against a total debt of ~$5.3 billion. Its cash and cash equivalents were $65 million as of September 30, 2017.

JB Hunt Transport Services (JBHT) follows Ryder in the metric under consideration with a multiple of 1.03x. Its net debt is ~$1.1 billion, and its forward EBITDA is ~$1 billion. Its cash position was $8 million at the end of September 30, 2017. Werner Enterprises (WERN) has the lowest net debt-to-EBITDA multiple of 0.2x with a net debt of $68 million and a forward EBITDA of $361.1 million.

Carriers with more cash and less debt

Heartland Express (HTLD) had a cash and cash equivalent of $51 million as of September 30, 2017, and zero debt. So it has a negative net debt-to-EBITDA multiple. That’s also the case for Landstar System (LSTR) with cash of $295 million against a total debt of $152 million at the end of 3Q17.

How is trucking different from railroads?

US truckloads carriers (EXI) need to invest in a fleet, terminals, network and other infrastructure, and state-of-the-art technology. However, when compared with US Class I railroads, trucking is a less capital-intensive industry. Federal and state governments build interstates, highways, and necessary infrastructure used by trucking companies, while railroads have to lay track for expansion and replacement, which is an out-of-pocket expense.

In the next part of this series, we’ll take a look at the operating cash flows for the first nine months of 2017 for US truckload carriers.

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