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WIKI ANALYSIS
Celadon (CGI) is one of the top fifteen truckload carriers in North America by revenue. As a dry van truckload carrier, the company transports trailer loads of freight from origin to destination. Celadon's customers include large companies such as Alcoa (AA), General Electric Company (GE), Procter & Gamble Company (PG), and Wal-Mart (WMT). Nearly half of its revenue is generated from international transportation, and the company believes it is positioned for growth in its international operations, particularly those involving Mexico.[1]
Business Growth
Celadon has grown tremendously since incorporation in 1986, both internally and through acquisitions starting in 1995. The company also owns TruckersB2B, a marketing business that provides purchasing services for 20,000 member trucking fleets. The company's international business has been strongly encouraged by the North American Free Trade Agreement (NAFTA).[2]
Trends and Forces
Growth Driven by Mexico and Canada
The company's success is dependent upon the success of its operations in Mexico and Canada, which accounted for 44% of revenue in 2010.[3] CGI has used its balance sheet more aggressively over the past few years than many of its competitors to make acquisitions abroad, particularly into and out of Mexico.[4] Within these markets abroad, Celadon faces foreign currency risk, economic risk, regulatory risk, and risk of sociocultural instability.
Cyclical Nature of Transportation Industry
The trucking industry has experienced three cycles over the last twenty years, roughly consistent with the health of the overall economy. The trailer industry generally precedes overall transportation industry cycles.[5] The most recent cycle peaked in 2006 with overall trucking shipments of 280,000 and bottomed in 2009 with shipments of 79,000 trailers.[6] Within the year, the season between May and October tends to be better due to increased seasonal shipping and better weather.[7] Investors should be well aware of these long and short cycles.
Competition
The trucking industry is defined by transporters of goods, generally over 10,000 pounds, shipped by a single customer point-to-point. The industry is divided into several segments by the type of trailer used in transporting the goods. These segments include van, temperature-controlled, flatbed, and tank carriers. Celadon competes in the North American van truckload market. Trucking markets North America are highly fragmented, with thousands of competitors, none of whom dominate the market. However, economic pressures are force many smaller and private fleets to exit the industry or consolidate.[8]
References
- ↑ CGI 10-K 2010, page 3
- ↑ CGI 10-K 2010, page 4
- ↑ CGI 10-K 2010, page 3
- ↑ Celadon, S&P Analyst Report, 28 May 2011
- ↑ Wabash, S&P Analyst Report, 28 May 2011
- ↑ Wabash, TheStreet Analyst Report, 29 May 2011
- ↑ CGI 10-K 2009, page 8
- ↑ CGI 10-K 2010, page 6
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