We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
“We’re just in the beginning stages of this very robust recovery,” said Bob Costello, chief economist at American Trucking Associations. He expects 6.4% GDP growth in 2021, the fastest annual growth rate since 1984. He expects this to be followed by 4.3% growth in 2022, which is also well above average.
Overall economic growth is very good for trucking stocks because increased production essentially means there’s going to be more goods to be moved to more customers. And while some of this will be in the services segment, industry watchers confirm that there’s also a lot of pent-up demand for goods. The initial days of the reopening have already depleted store inventories that Costello says are at “the lowest level in history.”
The pandemic has altered buying habits to a certain degree, so more people will be buying more stuff from home. But there doesn’t at the moment seem to be a marked reduction in those sales even as demand from brick-and-mortar picks up.
At the same time, the industry is battling with limited capacity (it takes 4-6 months for delivery of new trucks, which are now delayed because of chip shortages). And the paucity of labor remains a sore point for most truckers because the average age of drivers continues to rise with many approaching retirement. Regulatory factors also took some drivers off the road. Plus, the pandemic slowed down training, which in turn slowed down recruitment.
So there’s a scarcity of drivers and a scarcity of trucks, which are together creating severe capacity constraints in the face of continually rising demand. Of course, this means rising rates. DAT data shows that between Jun 2020 and Jun 2021, the van load-to-truck increased 57.8% with a 47.1% increase in van spot rates. Flatbed road-to-truck increased 169.3% while spot rates jumped 52.1%. Reefer load-to-truck grew 111.7% while reefer spot rates increased 43.4%. Overall spot market loads increased 101.5% with overall capacity increasing 0.3%.
But of course not all of the rate increases are falling through to the bottom lines of trucking companies. DAT data also shows a 36.5% increase in fuel cost within this period. Wage rates have also picked up strongly as companies struggle to recruit and retain drivers.
The current lack of equilibrium between demand and supply is likely to continue through the rest of 2021 and most of 2022. As a result, trucking stocks are a great place to put your money. Here are a few worth picking up today-
Zacks #1 (Strong Buy) ranked ArcBest Corp. (ARCB - Free Report) is currently expected to grow revenue and earnings 20.1% and 61.6% this year. The company’s estimates have been rising consistently through the last 90 days. It has a solid surprise history (+618.3% average surprise in the last four quarters). The company reports on Aug 2.
Covenant Logistics Group, Inc. (CVLG - Free Report) is also a #1 ranked stock. It is expected to grow revenue 18.0% and earnings 194.4% this year. CVLG’s estimates have also been rising and jumped 21.4% in the last 7 days after the company reported strong results. Its four-quarter surprise averages +33.1%.
Next up is Forward Air Corp. (FWRD - Free Report) , which carries a Zacks #2 (Buy) rating. It is expected to grow revenue and earnings by a respective 15.0% and 85.2% this year. Its estimates are also trending up, so be prepared for a strong announcement when the company reports on Jul 29.
#2 ranked KnightSwift Transportation Holdings Inc. (KNX - Free Report) is expected to grow 2021 revenue and earnings by 20.2% and 44.0%, respectively. The 2021 estimate jumped 6.8% since the company reported results.
Landstar System, Inc. (LSTR - Free Report) carries a Zacks #2 rank. Its revenue and earnings are expected to grow 37.8% and 75.7% this year. It is also showing a steady estimate revision trend.
Old Dominion Freight Line, Inc. (ODFL - Free Report) has a Zacks #2 rank. The company, which will report on Jul 28, continues to see a positive estimate revision trend. Its current-year earnings are currently expected to grow 40.7% on 22.3% higher revenue.
And finally, we have #2 ranked USA Truck, Inc. , which is expected to grow its earnings 223.5% this year. The company reports on Jul 29. Its estimate revision trend and surprise history (152.7% average beat in the last four quarters) are encouraging.
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Trucking Stocks Are Still Going Places
Trucking is one very attractive market right now.
“We’re just in the beginning stages of this very robust recovery,” said Bob Costello, chief economist at American Trucking Associations. He expects 6.4% GDP growth in 2021, the fastest annual growth rate since 1984. He expects this to be followed by 4.3% growth in 2022, which is also well above average.
Overall economic growth is very good for trucking stocks because increased production essentially means there’s going to be more goods to be moved to more customers. And while some of this will be in the services segment, industry watchers confirm that there’s also a lot of pent-up demand for goods. The initial days of the reopening have already depleted store inventories that Costello says are at “the lowest level in history.”
The pandemic has altered buying habits to a certain degree, so more people will be buying more stuff from home. But there doesn’t at the moment seem to be a marked reduction in those sales even as demand from brick-and-mortar picks up.
At the same time, the industry is battling with limited capacity (it takes 4-6 months for delivery of new trucks, which are now delayed because of chip shortages). And the paucity of labor remains a sore point for most truckers because the average age of drivers continues to rise with many approaching retirement. Regulatory factors also took some drivers off the road. Plus, the pandemic slowed down training, which in turn slowed down recruitment.
So there’s a scarcity of drivers and a scarcity of trucks, which are together creating severe capacity constraints in the face of continually rising demand. Of course, this means rising rates. DAT data shows that between Jun 2020 and Jun 2021, the van load-to-truck increased 57.8% with a 47.1% increase in van spot rates. Flatbed road-to-truck increased 169.3% while spot rates jumped 52.1%. Reefer load-to-truck grew 111.7% while reefer spot rates increased 43.4%. Overall spot market loads increased 101.5% with overall capacity increasing 0.3%.
But of course not all of the rate increases are falling through to the bottom lines of trucking companies. DAT data also shows a 36.5% increase in fuel cost within this period. Wage rates have also picked up strongly as companies struggle to recruit and retain drivers.
The current lack of equilibrium between demand and supply is likely to continue through the rest of 2021 and most of 2022. As a result, trucking stocks are a great place to put your money. Here are a few worth picking up today-
Zacks #1 (Strong Buy) ranked ArcBest Corp. (ARCB - Free Report) is currently expected to grow revenue and earnings 20.1% and 61.6% this year. The company’s estimates have been rising consistently through the last 90 days. It has a solid surprise history (+618.3% average surprise in the last four quarters). The company reports on Aug 2.
Covenant Logistics Group, Inc. (CVLG - Free Report) is also a #1 ranked stock. It is expected to grow revenue 18.0% and earnings 194.4% this year. CVLG’s estimates have also been rising and jumped 21.4% in the last 7 days after the company reported strong results. Its four-quarter surprise averages +33.1%.
Next up is Forward Air Corp. (FWRD - Free Report) , which carries a Zacks #2 (Buy) rating. It is expected to grow revenue and earnings by a respective 15.0% and 85.2% this year. Its estimates are also trending up, so be prepared for a strong announcement when the company reports on Jul 29.
#2 ranked KnightSwift Transportation Holdings Inc. (KNX - Free Report) is expected to grow 2021 revenue and earnings by 20.2% and 44.0%, respectively. The 2021 estimate jumped 6.8% since the company reported results.
Landstar System, Inc. (LSTR - Free Report) carries a Zacks #2 rank. Its revenue and earnings are expected to grow 37.8% and 75.7% this year. It is also showing a steady estimate revision trend.
Old Dominion Freight Line, Inc. (ODFL - Free Report) has a Zacks #2 rank. The company, which will report on Jul 28, continues to see a positive estimate revision trend. Its current-year earnings are currently expected to grow 40.7% on 22.3% higher revenue.
And finally, we have #2 ranked USA Truck, Inc. , which is expected to grow its earnings 223.5% this year. The company reports on Jul 29. Its estimate revision trend and surprise history (152.7% average beat in the last four quarters) are encouraging.