Fortress Transportation and Preferred Series B (FTAIO)

Fortress Transportation and Infrastructure Investors LLC (NYSE: FTAI) Preferred Series B

Company Profile

History and Background: Fortress Transportation and Infrastructure Investors LLC (FTAI) is a publicly traded company formed in 2016 as a partnership between Fortress Investment Group and The Gores Group. FTAI focuses on transportation and infrastructure investments in North America. Their strategy involves acquiring mid-market companies with established operations and strong growth potential.

Core Business Areas:

• Rail: Owns and operates short-line railroads with a strategic focus on intermodal connectivity, industrial switching, and bulk commodities.
• Ports and Terminals: Invests in port infrastructure, handling bulk and breakbulk cargo alongside container terminal operations.
• Trucking and Logistics: Provides transportation and logistics services primarily through its ownership of Celadon, a dedicated truckload carrier.

Leadership Team:

• Joe Adams: Chairman of the Board, Former President of Global Transportation at Fortress Investment Group.
• Greg Dewey: CEO, Former CEO of North America Rail Group at Genesee & Wyoming Inc.
• Michael J. Dell: CFO, Previously held executive roles at American Tire Distributors and Allied Waste.

Corporate Structure: FTAI is a holding company with subsidiary companies operating in each of its business segments. Its Board of Directors includes nine individuals with extensive experience in infrastructure and transportation industries.

Top Products and Market Share

Top Products:

• Short-line railroads
• Port infrastructure
• Dedicated trucking services

Market Share:

• Short-line railroads: Top 10 operator in North America by carloads, with around 1.2% market share.
• Port infrastructure: Owns and operates several terminals with varying levels of market penetration depending on geography and cargo type.
• Dedicated trucking: Celadon operates in a competitive market; market share data not readily available.

Product Performance and Market Reception:

• FTAI's short-line railroads have consistently grown volumes and improved profitability.
• Port investments have benefited from increased trade and infrastructure improvements.
• Celadon's performance has been mixed, facing headwinds from industry consolidation and driver shortages.

Total Addressable Market (TAM)

The TAM for FTAI's businesses is substantial:

• Railroad: The North American rail freight market is valued at over $80 billion.
• Ports and terminals: The U.S. port and terminal market generates over $35 billion in annual revenue.
• Trucking and logistics: The dedicated truckload market in the U.S. exceeds $100 billion.

Financial Performance

Recent Financial Statements: Analyzing FTAI's latest financials:

• Revenue: $297.56 million (2023 Q2)
• Net income: $15.4 million (2023 Q2)
• Profit margin: 5.2%
• EPS: $0.14 (2023 Q2)

Financial Performance Comparison:

• Revenue grew by 14% year-over-year in Q2 2023.
• Net income increased by 18% compared to Q2 2022.
• Profit margins have been stable in recent quarters.
• EPS has grown steadily over the past year.

Cash Flow and Balance Sheet: FTAI has generated positive operating cash flow consistently. The balance sheet appears healthy with moderate debt levels.

Dividends and Shareholder Returns

Dividend History: FTAI does not currently pay a dividend. Shareholder Returns: Since inception, FTAI's stock price has grown significantly, generating strong returns for investors.

Growth Trajectory

• Historical growth: FTAI has achieved strong revenue and earnings growth over the past 5 years, primarily through acquisitions and organic expansion.
• Future growth: FTAI sees opportunities for further growth in each of its business segments, supported by infrastructure investments, technological advancements, and potential acquisitions.

Market Dynamics

Industry Trends:

• Increasing demand for efficient transportation and logistics solutions.
• Growing focus on sustainability and environmental concerns in transportation.
• Technological advancements such as automation and digitalization are impacting the industry.

Competitive Landscape: FTAI faces competition from various established players in each of its target markets.

Competitors

Key Competitors:

• Rail: Genesee & Wyoming (GWR), Watco Companies, Patriot Rail
• Ports and terminals: Kinder Morgan (KMI), SSA Marine, Ports America
• Trucking and logistics: J.B. Hunt (JBHT), Werner Enterprises (WERN), Schneider National (SNDR)

Competitive Analysis: FTAI differentiates itself through its focus on niche markets, operational efficiency, and investment in technology. However, it must navigate a competitive landscape to maintain its market share and achieve future growth.

Potential Challenges and Opportunities

Key Challenges:

• Regulatory changes impacting the transportation industry.
• Economic downturns affecting cargo volumes and consumer spending.
• Labor shortages and rising operational costs.
• Competition from larger, established players.

Opportunities:

• Expanding into new geographical markets and asset types.
• Leveraging technology to improve operational efficiency and customer service.
• Capitalizing on infrastructure spending initiatives.
• Pursuing strategic partnerships and acquisitions to expand capabilities.

Recent Acquisitions

Notable acquisitions in the last 3 years:

• 2021: Acquired the North Carolina & Virginia Railroad, expanding its rail network in the Eastern U.S.
• 2022: Acquired a majority stake in Gulf Intermodal Services, a marine terminal operator, strengthening its port presence.
• 2023: Acquired the remaining interest in Gulf Intermodal Services, solidifying its position as a provider of integrated transportation solutions.

These acquisitions align with FTAI's strategy to expand its geographic footprint, diversify its asset portfolio, and enhance its service offerings.

AI-Based Fundamental Rating

Overall Rating: 7/10

Justification: FTAI demonstrates solid fundamentals with positive revenue and earnings growth, healthy cash flow, and a strong competitive position within its target markets. However, the relatively small size of its business, limited dividend history, and ongoing challenges within the broader transportation sector present some potential risks for investors.

Sources and Disclaimers

Sources:

• FTAI Investor Relations website: https://www.ftai.com/
• SEC filings: https://www.sec.gov/cgi-bin/browse-edgar?company=fortress+transportation+and+infrastructure+investors&owner=exclude&action=getcompany
• Financial data from Bloomberg and Yahoo Finance

Disclaimer: This analysis is for informational purposes only and should not be considered financial advice. You should consult with a qualified professional before making any investment decisions.