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Tuesday, August 29, 2006

Transports Slowing?

By William Trent CFA of Stock Market Beat

Add a slowdown in transportation to the housing slowdown and rising gas prices as indications the economy is slowing dramatically. FedEx (FDX) is down nearly 20% from recent highs, and the sector as a whole has posted mediocre performance. Yesterday, Watch List member Landstar (LSTR) hosted its mid-quarter conference call, where instead of raising guidance as is their custom they merely reaffirmed existing guidance.

The third quarter appears generally to be shaping up as we thought. However, we have seen some softening in certain accounts as previously mentioned. Based upon the continuation of current business levels, and the anticipated increase in seasonal demand in the September period, I’m reaffirming our prior revenue guidance for the 2006 third quarter for revenue in a range of 645 million to $665 million.

Landstar is likely to make up any shortfalls through their FEMA contract, under which they provide transportation for disaster relief, clean-up and rebuilding. Although it looks to be a relatively minor storm, Landstar has already been activated to prepare for Ernesto.

Other transportation names have more to be concerned about, and bulls should be concerned by the growing number of signals that the economic slowdown may be more than a soft landing.

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