Trucking capacity is tight and is expected to get tighter from both an equipment and a labour perspective, according to a 2013 Transportation Outlook by CIBC World Markets.
Truck utilization moved up throughout 2012 and is now 95 percent, indicating a tight market, and forecasted to move above 100 percent over the next 12 months, stated the report, which cited trucking industry sources.
โFrom a labour perspective, there is no end in sight for the driver shortage that has been a theme in the industry for some time, exacerbated by the hours of service rules put in place last year,โ states the reportโs authors, who add that the capacity crunch bodes well for stability in freight rates โand any pick-up in volumes will result in significant upward pressure on pricing,โ despite the weak economy.
Additionally, the report states that modest economic growth over the last three years has made it difficult for smaller owner operators to compete and a continuation of consolidation in the Canadian trucking industry is expected, โespecially given how fragmented the industry is โฆ โThis will be key for larger operators to combat a weak organic growth environment.โ
Given the current environment remains a buyerโs market, โacquisition multiples have been relatively depressed resulting in immediate earnings accretion.
โMost deals are being done at 5x EV/EBITDA or less and we expect this pricing trend to continue.โ
After sitting on the sidelines for much of 2012, CIBC expects the largest for-hire motor carriers, such asย TransForce, to resume activity on the acquisition front in 2013.
