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4 Top Trucking Stocks Set to Gain From Freight Recovery
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Improved freight demand, thanks to ramp up in business activities, is aiding the Zacks Transportation - Truck industry. Capacity constraints in the face of increased freight volumes are pushing up truck rates, which in turn are supporting the top line of trucking companies. These tailwinds point toward a healthy outlook for the trucking industry in the nearterm.
With truck volumes anticipated to keep improving as economic recovery picks up pace in the course of the year, trucking companies like P.A.M. Transportation Services (PTSI - Free Report) , USA Truck , ArcBest Corporation (ARCB - Free Report) and Saia (SAIA - Free Report) stand to benefit.
About the Industry
The Zacks Transportation - Truck industry consists of truck operators transporting freight to a diverse group of customers, primarily across North America. These companies provide full-truckload or less-than-truckload (“LTL”) services over the short, medium or long haul. In addition, most of these entities offer logistics and intermodal services. A few also offer asset-light services to other third-party logistics companies in the transportation sector.
Some prominent industry players are J.B. Hunt Transport Services (JBHT - Free Report) and Old Dominion Freight Line (ODFL - Free Report) . J.B. Hunt provides a broad range of transportation services to customers throughout the United States, Canada and Mexico. Meanwhile, Old Dominion is an LTL company based in Thomasville, NC.
3 Trends Shaping the Future of the Trucking Industry
Improved Freight Demand: Despite a tumultuous first half, the trucking industry ended 2020 on a positive note. As economic activities ramped up in the second half of 2020, freight demand picked up, thus aidingthe revival of the trucking industry. With strong e-commerce demand, thanks to coronavirus keeping people homebound, most trucking companies experienced significant increase in freight volumes in the fourth quarter of 2020. For instance, Landstar System’s (LSTR - Free Report) fourth-quarter earnings and revenues surged 58.3% and 30.3% respectively from the year-ago levels owing to higher volumes stemming from the year-end spike in e-commerce. Given the prevalent pandemic and vaccines yet to be distributed on a large scale, industry experts expect e-commerce demand to continue to boost truck freight volumes in the first half of 2021. As economic recovery accelerates in 2021, trucking volumes should continue to improve throughout the year.
Truck-Driver Shortage: Driver shortage continues to plague the trucking industry, resulting in reduced truck capacity. As old drivers retire, trucking companies find it difficult to hire new drivers, one of the reasons being low driver wages.The COVID-19 pandemic among other factors has aggravated the driver scarcity problem. With freight demand improving, the issue may further exacerbate.
Rising Truck Rates: Increased freight demand coupled with capacity constraints is leading to higher truck rates, which in turn is aiding the top line of trucking companies. Truckload carrier U.S. Xpress forecasts contract rates to increase between 8% and 15% during 2021.Additionally, the company expects spot rates to rise until the fall months, and then slow down a bit before rising again during the peak holiday season.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Trucking Industry, housed within the broader Zacks Transportation sector, currently carries a Zacks Industry Rank #32. This rank places it at the top 13% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, implies encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. The industry’s earnings estimate has been revised upward by 11.9% over the past year.
Given the bullish near-term prospects of the industry, we will present a few stocks that you may want to consider for your portfolio. But it’s worth taking a look at the industry’s shareholder returns and its current valuation first.
Industry Outperforms Sector & S&P 500
The Zacks Truck industry has outperformed the broader Transportation sector and the Zacks S&P 500 composite over the past year.
Over this period, the industry has rallied 50.6% compared with the broader sector and the S&P 500 Index’s 32.2% and 28.1% rise, respectively.
One-Year Price Performance
Industry’s Current Valuation
On the basis of trailing 12-month EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization), which is a commonly used multiple for valuing transportation stocks, the industry is currently trading at 12.34X compared with the S&P 500’s 16.86X. It is also below the sector’s EV/EBITDA of 14.67X.
Over the past five years, the industry has traded as high as 22.27X, as low as 6.43X and at the median of 9.21X as the chart below shows.
Enterprise Value/EBITDA (TTM)
Enterprise Value/EBITDA (TTM)
4 Trucking Stocks to Keep a Tab on
P.A.M. Transportation Services: This is an irregular route, common and contract motor carrier authorized to transport general commodities. Cost-control measures are supporting the company’s bottom-line growth. Additionally, this Zacks Rank #1 (Strong Buy) company is benefiting from increased truck rates, thanks to a supply and demand imbalance in the trucking market. A further catalyst to its growth is its relatively young truck fleet, which should drive operational efficiency. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for the company’s current-year earnings has been revised upward by 23.2% in the past 60 days. The stock has rallied more than 62% in the past six months.
Price and Consensus: PTSI
USA Truck: This company is engaged in the transportation of general commodity freight in interstate and foreign commerce. It operates in the continental United States and in parts of Canada and Mexico. Improved operational efficiency, network refinement and cost-containment efforts should continue to drive the company’s performance. Additionally, higher demand for its services amid tight truck supply is helping the company realize better rates. This in turn is boosting the company’s top line. The stock sports a Zacks Rank #1.
The Zacks Consensus Estimate for USA Truck’s current-year earnings has been revised northward by 12.9% in the past 60 days. Shares of the company have gained 18.2% over the past six months.
Price and Consensus: USAK
ArcBest Corporation: Based in Fort Smith, AK, the company provides freight transportation services and solutions. Improving freight demand is boosting the company’s tonnage and shipment levels. The company, carrying a Zacks Rank #2 (Buy), is also benefiting from effective cost management. ArcBest’s commitment to reward its shareholders raises optimism in the stock. Notably, its board extended the share repurchase program by authorizing a total of $50 million.
The Zacks Consensus Estimate for ArcBest’s 2021 earnings has been revised upward by 11.3% in the past 60 days. Shares of the company have surged 72.1% in the past six months.
Price and Consensus: ARCB
Saia: Headquartered in Johns Creek, GA, this is a leading transportation company providing LTL services. Higher shipments and favorable pricing are aiding this Zacks Rank #2 company’s top line. The company’s focus on expanding its network is likely to drive growth going forward.
The Zacks Consensus Estimate for the company’s 2021 earnings has been revised upward by 7.8% in the past 60 days. Shares of the company have soared 50% in the past six months.
Price and Consensus: SAIA
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.9% per year.
These 7 were selected because of their superior potential for immediate breakout.
Image: Shutterstock
4 Top Trucking Stocks Set to Gain From Freight Recovery
Improved freight demand, thanks to ramp up in business activities, is aiding the Zacks Transportation - Truck industry. Capacity constraints in the face of increased freight volumes are pushing up truck rates, which in turn are supporting the top line of trucking companies. These tailwinds point toward a healthy outlook for the trucking industry in the nearterm.
With truck volumes anticipated to keep improving as economic recovery picks up pace in the course of the year, trucking companies like P.A.M. Transportation Services (PTSI - Free Report) , USA Truck , ArcBest Corporation (ARCB - Free Report) and Saia (SAIA - Free Report) stand to benefit.
About the Industry
The Zacks Transportation - Truck industry consists of truck operators transporting freight to a diverse group of customers, primarily across North America. These companies provide full-truckload or less-than-truckload (“LTL”) services over the short, medium or long haul. In addition, most of these entities offer logistics and intermodal services. A few also offer asset-light services to other third-party logistics companies in the transportation sector.
Some prominent industry players are J.B. Hunt Transport Services (JBHT - Free Report) and Old Dominion Freight Line (ODFL - Free Report) . J.B. Hunt provides a broad range of transportation services to customers throughout the United States, Canada and Mexico. Meanwhile, Old Dominion is an LTL company based in Thomasville, NC.
3 Trends Shaping the Future of the Trucking Industry
Improved Freight Demand: Despite a tumultuous first half, the trucking industry ended 2020 on a positive note. As economic activities ramped up in the second half of 2020, freight demand picked up, thus aidingthe revival of the trucking industry. With strong e-commerce demand, thanks to coronavirus keeping people homebound, most trucking companies experienced significant increase in freight volumes in the fourth quarter of 2020. For instance, Landstar System’s (LSTR - Free Report) fourth-quarter earnings and revenues surged 58.3% and 30.3% respectively from the year-ago levels owing to higher volumes stemming from the year-end spike in e-commerce. Given the prevalent pandemic and vaccines yet to be distributed on a large scale, industry experts expect e-commerce demand to continue to boost truck freight volumes in the first half of 2021. As economic recovery accelerates in 2021, trucking volumes should continue to improve throughout the year.
Truck-Driver Shortage: Driver shortage continues to plague the trucking industry, resulting in reduced truck capacity. As old drivers retire, trucking companies find it difficult to hire new drivers, one of the reasons being low driver wages.The COVID-19 pandemic among other factors has aggravated the driver scarcity problem. With freight demand improving, the issue may further exacerbate.
Rising Truck Rates: Increased freight demand coupled with capacity constraints is leading to higher truck rates, which in turn is aiding the top line of trucking companies. Truckload carrier U.S. Xpress forecasts contract rates to increase between 8% and 15% during 2021.Additionally, the company expects spot rates to rise until the fall months, and then slow down a bit before rising again during the peak holiday season.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Trucking Industry, housed within the broader Zacks Transportation sector, currently carries a Zacks Industry Rank #32. This rank places it at the top 13% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, implies encouraging near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. The industry’s earnings estimate has been revised upward by 11.9% over the past year.
Given the bullish near-term prospects of the industry, we will present a few stocks that you may want to consider for your portfolio. But it’s worth taking a look at the industry’s shareholder returns and its current valuation first.
Industry Outperforms Sector & S&P 500
The Zacks Truck industry has outperformed the broader Transportation sector and the Zacks S&P 500 composite over the past year.
Over this period, the industry has rallied 50.6% compared with the broader sector and the S&P 500 Index’s 32.2% and 28.1% rise, respectively.
One-Year Price Performance
Industry’s Current Valuation
On the basis of trailing 12-month EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization), which is a commonly used multiple for valuing transportation stocks, the industry is currently trading at 12.34X compared with the S&P 500’s 16.86X. It is also below the sector’s EV/EBITDA of 14.67X.
Over the past five years, the industry has traded as high as 22.27X, as low as 6.43X and at the median of 9.21X as the chart below shows.
Enterprise Value/EBITDA (TTM)
Enterprise Value/EBITDA (TTM)
4 Trucking Stocks to Keep a Tab on
P.A.M. Transportation Services: This is an irregular route, common and contract motor carrier authorized to transport general commodities. Cost-control measures are supporting the company’s bottom-line growth. Additionally, this Zacks Rank #1 (Strong Buy) company is benefiting from increased truck rates, thanks to a supply and demand imbalance in the trucking market. A further catalyst to its growth is its relatively young truck fleet, which should drive operational efficiency. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for the company’s current-year earnings has been revised upward by 23.2% in the past 60 days. The stock has rallied more than 62% in the past six months.
Price and Consensus: PTSI
USA Truck: This company is engaged in the transportation of general commodity freight in interstate and foreign commerce. It operates in the continental United States and in parts of Canada and Mexico. Improved operational efficiency, network refinement and cost-containment efforts should continue to drive the company’s performance. Additionally, higher demand for its services amid tight truck supply is helping the company realize better rates. This in turn is boosting the company’s top line. The stock sports a Zacks Rank #1.
The Zacks Consensus Estimate for USA Truck’s current-year earnings has been revised northward by 12.9% in the past 60 days. Shares of the company have gained 18.2% over the past six months.
Price and Consensus: USAK
ArcBest Corporation: Based in Fort Smith, AK, the company provides freight transportation services and solutions. Improving freight demand is boosting the company’s tonnage and shipment levels. The company, carrying a Zacks Rank #2 (Buy), is also benefiting from effective cost management. ArcBest’s commitment to reward its shareholders raises optimism in the stock. Notably, its board extended the share repurchase program by authorizing a total of $50 million.
The Zacks Consensus Estimate for ArcBest’s 2021 earnings has been revised upward by 11.3% in the past 60 days. Shares of the company have surged 72.1% in the past six months.
Price and Consensus: ARCB
Saia: Headquartered in Johns Creek, GA, this is a leading transportation company providing LTL services. Higher shipments and favorable pricing are aiding this Zacks Rank #2 company’s top line. The company’s focus on expanding its network is likely to drive growth going forward.
The Zacks Consensus Estimate for the company’s 2021 earnings has been revised upward by 7.8% in the past 60 days. Shares of the company have soared 50% in the past six months.
Price and Consensus: SAIA
Just Released: Zacks’ 7 Best Stocks for Today
Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.9% per year.
These 7 were selected because of their superior potential for immediate breakout.
See these time-sensitive tickers now >>