Hub Group, a major intermodal transportation provider and a company that would be on the front lines of a merger between Union Pacific and Norfolk Southern, likes what it sees.
In the prepared statement released in conjunction with the company’s second quarter earnings, Hub Group (NASDAQ: HUBG), said it was “supportive” of the two companies and their merger plans to create the nation’s first transcontinental railroad. .
“The announced transaction would further accelerate our long-term growth opportunity,” the company said. “Specifically, a transcontinental network removes friction in gateways, reduces transit times, provides access to new markets, and increases competition with truck volume through new single-line service.”
When President and CEO Phil Yeager first brought up the merger on the company’s call with analysts Thursday after the numbers and statement were released, he echoed the positive sentiments in the earnings release. But he also asked the analysts on the call to not focus on the merger and the impact it might have on Hub Group. “We would appreciate questions being focused on the company and our results,” Yeager said.
And then when the phone lines were open to questions, Yeager’s request was promptly ignored and the first question was about the merger.
Despite his earlier admonition, Yeager took the question and continued to express support for the creation of the cross-country rail supergiant.
Yeager, in his prepared remarks, said Hub Group were “exclusive partners” with both Union Pacific and Norfolk Southern. With the two of them together, he said, “there are several catalysts that should create significant intermodal conversion,” citing “improved fluidity” in gateway cities, “faster transit, better asset utilization, enhanced fuel efficiency and access to additional lanes and markets.”
Yeager said about 30% of the Hub Group’s current business is “moving in a transcontinental fashion.” But since there is no single transcontinental railroad–establishing one being the point of the Union Pacific-Norfolk Southern (NYSE: UNP) (NYSE: NSC) tieup–Yeager expressed optimism about the efficiencies that could come from the existence of such a system instead of needing transfers between regional railroads..
Yeager said on the call that the transcontinental business is “typically a positive mix” for both revenue and margins.
Hub Group’s earnings release was the first since it announced its plan to acquire the intermodal operations of Marten Transport (NASDAQ: MRTN). Yeager said the acquisition “allows us to enhance our scale and capacity in one of the highest growth segments of our intermodal network,” which is refrigerated.