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4 Prominent Stocks From the Prospering Trucking Industry
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With freight market conditions expected to remain strong in 2022, the Zacks Transportation - Truck industry should continue to thrive on the back of higher volumes. While driver shortage poses a major challenge to the industry, elevated trucking rates amid persistent supply constraints are a boon. These factors point to a rosy near-term outlook for the trucking industry.
Companies like Old Dominion Freight Line (ODFL - Free Report) , J.B. Hunt Transport Services (JBHT - Free Report) , Knight-Swift Transportation Holdings (KNX - Free Report) and ArcBest Corporation (ARCB - Free Report) are poised to make the most of the buoyancy in the industry.
About the Industry
The Zacks Transportation - Truck industry consists of truck operators transporting freight to a diverse group of customers, mainly across North America. These companies provide full-truckload or less-than-truckload (“LTL”) services over the short, medium or long haul. The wide range of trucking services provided by these companies include dry-van, dedicated, refrigerated, flatbed and expedited. Some of these companies have an extensive fleet of company-owned tractors and trucks as well as independent contractor trucks. Besides trucking, most of these entities offer logistics and intermodal services (provided by moving freight over the rail), as well as value-added services like container drayage, truckload brokerage, supply chain consulting and warehousing. A few also offer asset-light services to other third-party logistics companies in the transportation sector.
3 Trends Shaping the Future of the Trucking Industry
Strong Freight Demand: The trucking industry is benefiting from continued improvement in freight demand as the U.S. economy continues to rebound. The American Trucking Associations’ (ATA) advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index increased 1.7% in September from the year-ago level. The same rose 2.4% from the August level, which was the largest sequential gain in 2021, per ATA Chief Economist Bob Costello. Despite supply chain disruptions, freight demand continues to be strong, thus boosting trucking volumes. This strength is expected to sustain in 2022 as economic activities gain momentum.
Driver Scarcity: Truck driver shortage continues to limit trucking capacity. Per ATA’s Chief Economist Bob Costello, the current driver shortage of 80,000 is an all-time high for the industry. As old drivers retire, trucking companies find it increasingly difficult to recruit new ones, despite significant pay raises. Given the expectations of a continued increase in freight demand, Costello estimates the truck driver shortage to worsen to more than 160,000 in 2030.
High Truck Rates: Capacity constraints coupled with strong freight demand are keeping truck freight rates high. Per the Cass Freight Index September report, freight rates rose 31.4% year over year in September, higher than a 26.6% year-over-year increase in August. With capacity constraints expected to continue into 2022, trucking rates are likely to remain elevated. This should drive the top line of trucking companies.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Trucking Industry, housed within the broader Zacks Transportation sector, currently carries a Zacks Industry Rank #19. This rank places it in the top 8% 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 32% 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 Both Sector & S&P 500
The Zacks Truck industry has outperformed both the broader Transportation sector and the Zacks S&P 500 composite index over the past year.
Over this period, the industry has rallied 62.8% compared with the broader sector and the S&P 500 Index’s 20% and 34.5% 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 13.76X compared with the S&P 500’s 15.46X. It is also below the sector’s EV/EBITDA of 19.22X.
Over the past five years, the industry has traded as high as 22.14X, as low as 7.01X and at the median of 11.10X as the chart below shows.
Enterprise Value/EBITDA (TTM)
Enterprise Value/EBITDA (TTM)
4 Promising Trucking Stocks
ArcBest: Based in Fort Smith, AK, the company provides freight transportation services and solutions. Strong shipper demand and higher pricing are driving growth across ArcBest’s Asset-Based and Asset-Light segments. The company’s recent acquisition of Chicago, IL-based truckload broker, MoLo Solutions, is expected to bolster its growth by boosting earnings and revenues. The acquisition will help ARCB serve larger customers, secure new customers in a better way and gain a strong foothold in the logistics innovation hub of Chicago.
The Zacks Consensus Estimate for ArcBest’s 2021 and 2022 earnings has been revised upward by 21.4% and 38.6% in the past 60 days, respectively. Shares of the company, which sports a Zacks Rank #1 (Strong Buy), have surged more than 100% in a year’s time. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: ARCB
Knight-Swift Transportation: Based in Phoenix, AZ, this is a major truckload carrier in North America, providing customers with low-cost truckload transportation, intermodal and logistics services. Higher revenues across all its segments, thanks to strong freight demand, are driving Knight-Swift’s growth. Anticipating strong freight market conditions to continue owing to inventory restocking and upbeat demand, the company, sporting a Zacks Rank #1, raised its current-year earnings per share guidance from $3.90-$4.05 to $4.50-$4.55. KNX’s strong performance is expected to continue in 2022 as freight market conditions remain strong.
The Zacks Consensus Estimate for Knight-Swift’s 2021 and 2022 earnings has been revised northward by 13.6% and 16.9% in the past 60 days, respectively. Shares of the company have rallied more than 45% in a year’s time.
Price and Consensus: KNX
J.B. Hunt Transport Services: Based in Lowell, AR, this company provides a broad range of transportation services to a diverse group of customers through the United States, Canada and Mexico. Fleet productivity improvement, favorable customer freight mix, higher contractual and spot rates, as well as an increase in load count in the Truck segment, are aiding J.B. Hunt, which carries a Zacks Rank #2 (Buy). Strength in the company’s final mile network owing to a spurt in online shopping is also a major growth catalyst. With these factors expected to sustain at least in the near term as economic recovery regains momentum after the Delta-variant-led slowdown, JBHT is expected to continue reaping benefits.
The Zacks Consensus Estimate for J.B. Hunt’s 2021 and 2022 earnings has been revised upward by 2.4% and 5.1% in the past 60 days, respectively. Shares of the company have gained more than 52% over the past year.
Price and Consensus: JBHT
Old Dominion Freight Line: This is a leading LTL company based in Thomasville, NC. With improved freight demand, strong performance of the LTL segment is driving growth of Old Dominion. In the first nine months of 2021, revenues from the LTL services segment increased 30.5% on a year-over-year basis. In the same period, LTL shipments and LTL revenue per shipment increased 19.5% and 9.2%, respectively. This strong performance is expected to continue on the back of favorable market conditions. Consistent improvement in the company’s operating ratio (operating expenses as a percentage of revenues) is also encouraging.
The Zacks Consensus Estimate for Old Dominion’s 2021 and 2022 earnings has been revised upward by approximately 3% and 5.9% in the past 60 days, respectively. Shares of the company, carrying a Zacks Rank #2, rose more than 72% over the past year.
Price and Consensus: ODFL
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4 Prominent Stocks From the Prospering Trucking Industry
With freight market conditions expected to remain strong in 2022, the Zacks Transportation - Truck industry should continue to thrive on the back of higher volumes. While driver shortage poses a major challenge to the industry, elevated trucking rates amid persistent supply constraints are a boon. These factors point to a rosy near-term outlook for the trucking industry.
Companies like Old Dominion Freight Line (ODFL - Free Report) , J.B. Hunt Transport Services (JBHT - Free Report) , Knight-Swift Transportation Holdings (KNX - Free Report) and ArcBest Corporation (ARCB - Free Report) are poised to make the most of the buoyancy in the industry.
About the Industry
The Zacks Transportation - Truck industry consists of truck operators transporting freight to a diverse group of customers, mainly across North America. These companies provide full-truckload or less-than-truckload (“LTL”) services over the short, medium or long haul. The wide range of trucking services provided by these companies include dry-van, dedicated, refrigerated, flatbed and expedited. Some of these companies have an extensive fleet of company-owned tractors and trucks as well as independent contractor trucks. Besides trucking, most of these entities offer logistics and intermodal services (provided by moving freight over the rail), as well as value-added services like container drayage, truckload brokerage, supply chain consulting and warehousing. A few also offer asset-light services to other third-party logistics companies in the transportation sector.
3 Trends Shaping the Future of the Trucking Industry
Strong Freight Demand: The trucking industry is benefiting from continued improvement in freight demand as the U.S. economy continues to rebound. The American Trucking Associations’ (ATA) advanced seasonally adjusted (SA) For-Hire Truck Tonnage Index increased 1.7% in September from the year-ago level. The same rose 2.4% from the August level, which was the largest sequential gain in 2021, per ATA Chief Economist Bob Costello. Despite supply chain disruptions, freight demand continues to be strong, thus boosting trucking volumes. This strength is expected to sustain in 2022 as economic activities gain momentum.
Driver Scarcity: Truck driver shortage continues to limit trucking capacity. Per ATA’s Chief Economist Bob Costello, the current driver shortage of 80,000 is an all-time high for the industry. As old drivers retire, trucking companies find it increasingly difficult to recruit new ones, despite significant pay raises. Given the expectations of a continued increase in freight demand, Costello estimates the truck driver shortage to worsen to more than 160,000 in 2030.
High Truck Rates: Capacity constraints coupled with strong freight demand are keeping truck freight rates high. Per the Cass Freight Index September report, freight rates rose 31.4% year over year in September, higher than a 26.6% year-over-year increase in August. With capacity constraints expected to continue into 2022, trucking rates are likely to remain elevated. This should drive the top line of trucking companies.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Trucking Industry, housed within the broader Zacks Transportation sector, currently carries a Zacks Industry Rank #19. This rank places it in the top 8% 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 32% 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 Both Sector & S&P 500
The Zacks Truck industry has outperformed both the broader Transportation sector and the Zacks S&P 500 composite index over the past year.
Over this period, the industry has rallied 62.8% compared with the broader sector and the S&P 500 Index’s 20% and 34.5% 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 13.76X compared with the S&P 500’s 15.46X. It is also below the sector’s EV/EBITDA of 19.22X.
Over the past five years, the industry has traded as high as 22.14X, as low as 7.01X and at the median of 11.10X as the chart below shows.
Enterprise Value/EBITDA (TTM)
Enterprise Value/EBITDA (TTM)
4 Promising Trucking Stocks
ArcBest: Based in Fort Smith, AK, the company provides freight transportation services and solutions. Strong shipper demand and higher pricing are driving growth across ArcBest’s Asset-Based and Asset-Light segments. The company’s recent acquisition of Chicago, IL-based truckload broker, MoLo Solutions, is expected to bolster its growth by boosting earnings and revenues. The acquisition will help ARCB serve larger customers, secure new customers in a better way and gain a strong foothold in the logistics innovation hub of Chicago.
The Zacks Consensus Estimate for ArcBest’s 2021 and 2022 earnings has been revised upward by 21.4% and 38.6% in the past 60 days, respectively. Shares of the company, which sports a Zacks Rank #1 (Strong Buy), have surged more than 100% in a year’s time. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: ARCB
Knight-Swift Transportation: Based in Phoenix, AZ, this is a major truckload carrier in North America, providing customers with low-cost truckload transportation, intermodal and logistics services. Higher revenues across all its segments, thanks to strong freight demand, are driving Knight-Swift’s growth. Anticipating strong freight market conditions to continue owing to inventory restocking and upbeat demand, the company, sporting a Zacks Rank #1, raised its current-year earnings per share guidance from $3.90-$4.05 to $4.50-$4.55. KNX’s strong performance is expected to continue in 2022 as freight market conditions remain strong.
The Zacks Consensus Estimate for Knight-Swift’s 2021 and 2022 earnings has been revised northward by 13.6% and 16.9% in the past 60 days, respectively. Shares of the company have rallied more than 45% in a year’s time.
Price and Consensus: KNX
J.B. Hunt Transport Services: Based in Lowell, AR, this company provides a broad range of transportation services to a diverse group of customers through the United States, Canada and Mexico. Fleet productivity improvement, favorable customer freight mix, higher contractual and spot rates, as well as an increase in load count in the Truck segment, are aiding J.B. Hunt, which carries a Zacks Rank #2 (Buy). Strength in the company’s final mile network owing to a spurt in online shopping is also a major growth catalyst. With these factors expected to sustain at least in the near term as economic recovery regains momentum after the Delta-variant-led slowdown, JBHT is expected to continue reaping benefits.
The Zacks Consensus Estimate for J.B. Hunt’s 2021 and 2022 earnings has been revised upward by 2.4% and 5.1% in the past 60 days, respectively. Shares of the company have gained more than 52% over the past year.
Price and Consensus: JBHT
Old Dominion Freight Line: This is a leading LTL company based in Thomasville, NC. With improved freight demand, strong performance of the LTL segment is driving growth of Old Dominion. In the first nine months of 2021, revenues from the LTL services segment increased 30.5% on a year-over-year basis. In the same period, LTL shipments and LTL revenue per shipment increased 19.5% and 9.2%, respectively. This strong performance is expected to continue on the back of favorable market conditions. Consistent improvement in the company’s operating ratio (operating expenses as a percentage of revenues) is also encouraging.
The Zacks Consensus Estimate for Old Dominion’s 2021 and 2022 earnings has been revised upward by approximately 3% and 5.9% in the past 60 days, respectively. Shares of the company, carrying a Zacks Rank #2, rose more than 72% over the past year.
Price and Consensus: ODFL