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**Market Capitalization of the Trucking Industry Sector, 2005**

Prepared by:

Brendon Fox

Loren Zadecky

Thomas M. Corsi

Michelle Smith Professor of Logistics

Co-Director, Supply Chain Management Center

Robert H. Smith School of Business

University of Maryland

College Park, MD 20742

Prepared for:

Analysis Division,

Office of Information Management

Federal Motor Carrier Safety Administration

September 2006

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height="1.3694444444444445in"}

***Executive Summary***

This report focuses on the market valuation of the overall trucking
industry sector and each segment within it. In the past, while the focus
has been on stock price appreciation or depreciation, this report
emphasizes market capitalization returns. Specifically, throughout this
report, the index created and displayed is market capitalization
weighted with daily rebalancing. Market capitalization is determined
from the daily stock price multiplied by the number of shares
outstanding. Market capitalization was chosen over past methodologies
because it gives a more accurate measure of how the overall market
values the trucking sector, trucking segments, and individual trucking
companies relative to the entire stock market. Further, market
capitalization changes were chosen rather than stock price changes in an
effort to eliminate effects of capital structure changes (i.e. stock
repurchases, issuances, splits, etc.) on stock prices.

The overall trucking industry sector has seen a slow down in market
capitalization growth compared to previous years for a multitude of
reasons which are explained in ***Assessing the Motor Carrier Industry
and Its Segments: Current and Prospective Issues, 2006.*** Most of the
trucking segments followed suit and realized a slow down in growth.
However, the logistics segment continued to outperform the industry and
the S&P 500. The logistics segment represents companies with active
3^rd^ Party Logistics activities. These activities encompass a broad
range of services beyond direct physical transportation to include
warehouse and inventory management, optimized shipment planning, network
design, and information technology and software implementation. The
following report explains these movements in more detail and compares
the overall trucking industry and its sectors to each other and the
overall market.

***Trucking Sector***

While the trucking industry sector realized strong growth in 2004 when
compared to the S&P 500, the past year has been quite different. As can
be seen in Figure 1, the trucking industry sector's cumulative returns
have lagged behind the S&P 500 returns from January 1, 2005 through
December 31, 2005, indeed, a substantial amount in some instances.
However, towards the end of the year, the sector realized positive
returns and moved closer to the S&P.

**Figure 1: Trucking Sector Index vs. S&P 500 January 1, 2005 --
December 31, 2005**

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height="3.502083333333333in"}

**Figure 2: Trucking Segments Cumulative Returns January 1, 2005 --
December 31, 2005** ![](media/image4.wmf){width="6.488888888888889in"
height="3.3756944444444446in"}

A review of Figure 2 shows that the trucking segments moved together for
the first half of the year. While each segment saw increasing returns in
the second half of the year, the overall segment that benefited most
from robust returns is the logistics segment. Specifically, as shown in
Table 1, the logistics realized a cumulative return of approximately 19
percent and boosted its market capitalization by over \$3 billion.
However, the segment with the largest market capitalization, the package
segment, realized a cumulative loss in market capitalization of -1.53
percent.

**Table 1: Trucking Sector by Segment**

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height="1.2909722222222222in"}

***Less-Than-Truckload Segment***

At the start of 2005, the less-than-truckload segment made up only 7.3
percent of the trucking industry sector and it gained little during the
year and stood at 7.5 percent of the sector's total capitalization by
the year's end. Table 2 details the companies included in the LTL
segment along with their respective beginning and year end market
capitalizations and their year end cumulative returns. Figure 3
graphically depicts the company specific cumulative returns from January
1, 2005 to December 31, 2005.

**Table 2: Less-Than-Truckload Company Data**

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height="2.6798611111111112in"}

As shown in the table, the mid-cap companies realized the most robust
cumulative returns with Forward Air Corp seeing a 17.87 percent return.
The small-cap companies were not able to withstand the industry shocks
in 2005 and saw a significant reduction in market capitalization.
Specifically, Central Freight Lines lost nearly 72 percent of its market
capitalization.

**Figure 3: Less-Than-Truckload Returns January 1, 2005 -- December 31,
2005**

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height="3.4868055555555557in"}

***Truckload Segment***

The truckload segment's percentage of the total trucking industry
sector's market capitalization decreased slightly during 2005 from 11.9
percent at the beginning of the year to 11.7% at the end of the year.
Overall, the segment realized a miniscule 0.29% cumulative return. Table
3 details the beginning and year end market capitalization as well as
the cumulative returns for each company within the segment. Figure 4
graphically depicts the company cumulative returns. Unlike the LTL
segment, the TL segment saw strong returns from its small cap members.
These firms proved to be more resilient to industry shocks than did its
LTL counterparts. However, the largest return came from USA truck, a mid
cap company, with nearly 110 percent return for the year. The mid caps
also realized the largest negative return -- US Express Enterprises saw
its market capitalization fall approximately 44 percent during 2005.

**Table 3: Truckload Company Data**

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height="4.061805555555556in"}

**Figure 4: Truckload Cumulative Returns January 1, 2005 -- December 31,
2005**

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height="3.834722222222222in"}

***Package Segment***

The package segment of the trucking industry sector is unique in that it
the largest by far at approximately 66 percent, while being made up of
only three companies. Similar to the past two segments covered in this
section of the report, the package segment's share of the trucking
industry sector's total capitalization fell during the year from 67
percent a the beginning of the year to 65 percent at the year's end.
Table 4 lists each package company's beginning and year end market
capitalization and cumulative returns. Figure 5 graphically shows these
returns over the year.

A cursory look at Table 4 shows that CD&L Inc saw a substantial
cumulative return in 2005 of nearly 92 percent. While this is
impressive, the increase had little effect on the entire segment due to
CD&L's significantly smaller market cap relative to the other members of
the segment. UPS, the largest member by far, saw a cumulative loss
(-6.48%) over the past year and, consequently pulled the entire segment
down as shown by the overall segment cumulative loss of 1.53 percent in
market capitalization.

**Table 4: Package Segment Company Data**

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height="1.4493055555555556in"}

**Figure 5: Package Segment Cumulative Returns January 1, 2005 --
December 31, 2005**

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height="3.438888888888889in"}

***Logistics Segment***

Unlike the other segments within the trucking industry sector, the
logistics segment achieved a strong cumulative return during 2005 of
approximately 19 percent. Furthermore, its percentage of the overall
trucking industry sector's market capitalization increased over 2
percent during 2005, from 13.5 percent at the beginning of the year to
15.8 percent at the end of the year. Table 5 lists the logistics
companies and their beginning and year end market caps and cumulative
returns. Figure 6 graphically portrays the company specific cumulative
returns for 2005.

In addition to having the overall strong return, the segment differs
from other segments in that the returns are being dominated by the large
cap companies as opposed to the mid or small cap firms. Specifically,
the top three firms by market cap, Expeditors International, CH Robinson
Worldwide, and Uti Worldwide, all realized very robust returns of 23.09
percent, 35.29 percent and 39.01 percent respectively. These returns
more than offset the cumulative losses suffered by the small cap
companies.

**Table 5: Logistics Segment Company Data**

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height="2.7444444444444445in"}

**Figure 6: Logistics Segment Cumulative Returns January 1, 2005 to
December 31, 2005**

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height="3.7472222222222222in"}

***Summary***

The year 2005 brought a slow down in market capitalization growth for
the trucking industry sector. Throughout much of the year, returns from
the trucking sector lagged returns form the S&P 500, although a late
surge at the end of the year for the trucking sector significantly
narrowed its gap with the S&P 500 index. Within the trucking sector,
there were uneven cumulative returns in market capitalization during
2005 with the logistics sector realizing an impressive 19 percent
return, followed by the less-than-truckload sector with a 4.3 percent
cumulative return. However, the truckload sector realized only a 0.29
percent return, while the package segment (by far the segment with the
highest total market capitalization in dollar value) experienced a 1.53
percent decline in market capitalization during the year.

Within the LTL sector, the mid-cap companies realized the highest
increase in cumulative returns during 2005, while the small-cap
companies experienced a decline. In contrast, among truckload carriers,
the small cap firms had the strong returns during 2005, while the
mid-cap firms had the weakest results. In the package segment, the
negative overall results were driven by the negative cumulative returns
for UPS, which dominates this segment in size by accounting for over
half of its total market capitalization. Finally, the trucking
industry's strongest segment in terms of overall cumulative gains during
2005 was the logistics segment. In contrast to the other segments, this
segment's large cap and mid cap firms had very robust cumulative returns
during 2005

Overall, the trucking industry stocks closed 2005 on an upswing.
Clearly, the emergence of the logistics segment with its emphasis on
providing an array of services beyond direct physical transportation is
viewed quite positively by the investor community as an opportunity for
industry firms to expand revenues. This may be important in the future
as traditional trucking firms evaluate opportunities to expand their
service portfolio in future years.