ALLENTOWN, Pa.--(BUSINESS WIRE)--Transportation companies face a myriad of challenges – from overcoming economic headwinds and rising interest rates to keeping warehouses organized and embracing digital technologies. These challenges have created a pressure-cooker situation, driving companies like Yellow Corporation and Hertz Global Holdings to file for bankruptcy. Today, Creditsafe, the global expert in credit monitoring and risk management, released its Financial & Bankruptcy Outlook: Transportation report, which examines how financial planning, cash flow management and Accounts Payable management have affected the financial health of U.S. transportation and warehousing businesses.
The report provides an in-depth analysis of the financial health and payment behaviors of 10 major U.S. transportation companies, including FedEx Corporation, Avis Budget Group, Hertz Global Holdings, Yellow Corporation, United Airlines Holdings, Spirit Airlines, Landstar System, Prologis, J.B. Hunt Transport Services and XPO. The data included in the report was gathered from multiple sources, including financial earnings reports released by the companies, filings with the U.S. Securities and Exchange Commission and the Creditsafe credit risk and intelligence platform.
Highlights from the report include:
- Avis Budget Group struggles with increasing long-term debt and erratic payment behaviors: Avis Budget Group’s long-term debt has consistently increased for the last three years. While this alone wouldn’t be reason enough to classify Avis as a high risk, Creditsafe data reveals that the company’s DBT spiked drastically from 8 in March to 31 in April and remained high until September.
- Spirit Airlines has been mired in mounting debt and liquidity problems: Earlier this year, Spirit Airlines said it was looking to refinance its debt and hopes to refinance $1.1 billion of debt due in 2025. To make matters worse, the airline doesn’t have a stable track record of paying bills on time. As Creditsafe data reveals, late payments increased over several months in 2023. For example, the number of late payments (1-30 days) rose from 7.00% in September 2023 to 30.87% in October 2023. A similar pattern occurred soon after when the number of late payments (1-30 days) rose from 6.37% in November 2023 to 30.54% in December 2023 and then again to 51.08% in January 2024.
- Since exiting bankruptcy in 2020, Hertz Global Holdings has improved liquidity and slashed costs: The company’s new investor group, led by Knighthead Capital Management and Certares Opportunities, injected $5.9 billion in new equity capital, which contributed to an 80% reduction in corporate debt. While its liquidity and cost cutting measures are positive signs, it’s somewhat concerning that the number of delinquent payments (91+ days) increased consistently during the second half of 2023. For instance, the number of delinquent payments (91+ days) rose from 4.64% in August to 6.90% in September, then rose again to 10.73% in October.
- XPO, Inc. is in strong financial shape: XPO’s DBT (Days Beyond Terms) has consistently dropped since August, indicating an improvement in its cash flow and financial management practices. At the same time, the company has taken strides to cut costs and acquired 28 of Yellow’s defunct service centers in December 2023. This acquisition is expected to enhance network integration, stimulate growth, improve margins and, ultimately, position XPO for long-term growth.
“The more we produce these types of reports and the more we speak to companies, the more affirmed we are in our belief that Days Beyond Terms (DBT) is one of the most important, yet misunderstood, metrics of financial health,” said Steve Carpenter, Country Director of North America at Creditsafe. “While we’re in no way saying that DBT alone tells the whole story, we can definitively say that it’s one of the most predictive metrics that gives insights into a company’s ability and willingness to pay its bills. What’s most important to remember is that an average DBT figure alone is far less predictive than patterns in how DBT fluctuates over time. When we see a significant and/or sudden spike in DBT over a short period of time, that’s a strong indicator that a company is experiencing liquidity problems and may not have done the necessary cash flow forecasting to prepare for revenue declines, increased spend and growing debt. Whether it’s DBT, the total percentage of late payments, the total value of late payments or another data point – it’s all about identifying the fluctuations and analyzing patterns and trends that help you understand how strong or weak a company’s financial situation is.”
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Creditsafe, the global expert in credit monitoring and risk management, is the world’s most used provider of business reports. Today, over 115,000 customers globally depend on Creditsafe to make critical business decisions. Using real-time data from over 9,000 sources across over 200 countries and territories, Creditsafe’s mission is to help businesses mitigate financial, legal and compliance risks, while also empowering them to make more informed decisions. To learn more, visit our website.
