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.
3 Truck Stocks to Keep an Eye On in a Challenging Industry
Read MoreHide Full Article
Several factors have dimmed the sentiment of the Zacks Transportation - Truck industry. These factors include worries regarding global economic growth and reduced freight demand. Truck driver shortages and supply-chain woes act as deterrents.
Despite macroeconomic challenges causing uncertainty in demand, the industry demonstrates resilience, especially for companies prioritizing growth and operational efficiency. Among the companies in the industry that will probably survive the business challenges are J.B. Hunt Transport Services (JBHT - Free Report) ,ArcBest Corporation (ARCB - Free Report) and Covenant Logistics Group (CVLG - Free Report) .
Industry Description
The Zacks Transportation - Truck industry consists of truck operators transporting freight to diverse customers, mainly across North America. These companies provide full-truckload or less-than-truckload (LTL) services over the short, medium or long haul. The range of trucking services these companies provide includes dry-van, dedicated, refrigerated, flatbed and expedited. Some companies have an extensive fleet of company-owned tractors and trucks and independent contractor trucks. Alongside trucking, most entities offer logistics and intermodal services 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
Supply-Chain Disruptions & Weak Freight Rates: Although economic activities picked up from the pandemic gloom, supply-chain disruptions continue to dent stocks in the industry. Below-par freight rates are also hurting the industry’s prospects. Highlighting the weak freight demand, the Cass Freight Shipments Index declined 4.5% year over year in February. This measure has deteriorated for 13 consecutive months on a year-over-year basis, which confirms the overall declining trend.
Strong Financial Returns for Shareholders:With economic activities gaining pace from the pandemic lows, more and more companies are allocating their increasing cash pile by way of dividends and buybacks to pacify long-suffering shareholders. This underlines their financial strength and confidence in the business. Among the players in the Trucking industry, JBHT announced an increase in the quarterly dividend this year.
Prolonged Truck-Driver Shortage:The persistent driver crisis in the trucking industry is worsening supply-chain challenges across the United States. Driver scarcity issues limit trucking capacity, making it difficult for trucking companies to meet increased freight demand. American Trucking Associations’ chief economist, Bob Costello, expects the trucking industry to be short of more than 160,000 drivers by 2030.
Zacks Industry Rank Indicates Dull Prospects
The Zacks Transportation - Truck industry is an 11-stock group within the broader Zacks Transportation sector. The industry currently carries a Zacks Industry Rank #211, which places it in the bottom 16% of 250 plus Zacks industries.
The group’s Zacks Industry Rank, the average of the Zacks Rank of all member stocks, indicates dismal near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential. The industry's earnings estimate for 2024 has decreased 12.1% on a year-over-year basis.
Before we present a few stocks from the industry that you may want to consider, let’s take a look at the industry’s recent stock market performance and the valuation picture.
Industry Outperforms the Sector and the S&P 500
The Zacks Transportation-Truck industry has surpassed the Zacks S&P 500 composite and the broader Transportation sector over the past year.
The industry has risen 36.5% over this period compared with the S&P 500's appreciation of 32.9% and the broader sector’s uptick of 13.4%.
One-Year Price Performance
Industry's Current Valuation
Based on the trailing 12-month EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization), a commonly used multiple for valuing trucking stocks, the industry is currently trading at 15.6X compared with the S&P 500’s 14.87X. It is also above the sector’s EV/EBITDA of 11.74X.
Over the past five years, the industry has traded as high as 15.75X and as low as 6.79X, with the median being 10.39X, as the chart below shows.
Enterprise Value-to-EBITDA Ratio (TTM)
3 Transport Truck Stocks to Watch
Covenant Logistics offers a portfolio of transportation and logistics services, including asset-based expedited, dedicated and irregular route truckload capacity along with asset-light warehousing, transportation management and freight brokerage capability.
CVLG’s cost-control efforts are appreciated. CVLG currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for Covenant Logistics’ 2024 earnings has been revised 1.2% upward over the past 60 days.
Price and Consensus: CVLG
ArcBest: Based in Fort Smith, AK, ARCB provides freight transportation services and solutions. Favorable pricing is driving growth across ArcBest’s Asset-Based and Asset-Light segments. ARCB’s MoLo Solutions acquisition enhanced the operations of the ArcBest segment by boosting shipments at the truckload services unit.
J.B. Hunt: J.B. Hunt Transport Services provides a broad range of transportation services to a diverse group of customers in the United States, Canada and Mexico. JBHT is benefiting from efforts to reward its shareholders through dividend payments and share repurchases.
J.B. Hunt’s efforts aimed at controlling costs bode well. Shares of JBHT have surged 19.4% in a year. JBHT currently carries a Zacks Rank of 3.
Price and Consensus: JBHT
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
3 Truck Stocks to Keep an Eye On in a Challenging Industry
Several factors have dimmed the sentiment of the Zacks Transportation - Truck industry. These factors include worries regarding global economic growth and reduced freight demand. Truck driver shortages and supply-chain woes act as deterrents.
Despite macroeconomic challenges causing uncertainty in demand, the industry demonstrates resilience, especially for companies prioritizing growth and operational efficiency. Among the companies in the industry that will probably survive the business challenges are J.B. Hunt Transport Services (JBHT - Free Report) ,ArcBest Corporation (ARCB - Free Report) and Covenant Logistics Group (CVLG - Free Report) .
Industry Description
The Zacks Transportation - Truck industry consists of truck operators transporting freight to diverse customers, mainly across North America. These companies provide full-truckload or less-than-truckload (LTL) services over the short, medium or long haul. The range of trucking services these companies provide includes dry-van, dedicated, refrigerated, flatbed and expedited. Some companies have an extensive fleet of company-owned tractors and trucks and independent contractor trucks. Alongside trucking, most entities offer logistics and intermodal services 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
Supply-Chain Disruptions & Weak Freight Rates: Although economic activities picked up from the pandemic gloom, supply-chain disruptions continue to dent stocks in the industry. Below-par freight rates are also hurting the industry’s prospects. Highlighting the weak freight demand, the Cass Freight Shipments Index declined 4.5% year over year in February. This measure has deteriorated for 13 consecutive months on a year-over-year basis, which confirms the overall declining trend.
Strong Financial Returns for Shareholders:With economic activities gaining pace from the pandemic lows, more and more companies are allocating their increasing cash pile by way of dividends and buybacks to pacify long-suffering shareholders. This underlines their financial strength and confidence in the business. Among the players in the Trucking industry, JBHT announced an increase in the quarterly dividend this year.
Prolonged Truck-Driver Shortage:The persistent driver crisis in the trucking industry is worsening supply-chain challenges across the United States. Driver scarcity issues limit trucking capacity, making it difficult for trucking companies to meet increased freight demand. American Trucking Associations’ chief economist, Bob Costello, expects the trucking industry to be short of more than 160,000 drivers by 2030.
Zacks Industry Rank Indicates Dull Prospects
The Zacks Transportation - Truck industry is an 11-stock group within the broader Zacks Transportation sector. The industry currently carries a Zacks Industry Rank #211, which places it in the bottom 16% of 250 plus Zacks industries.
The group’s Zacks Industry Rank, the average of the Zacks Rank of all member stocks, indicates dismal near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential. The industry's earnings estimate for 2024 has decreased 12.1% on a year-over-year basis.
Before we present a few stocks from the industry that you may want to consider, let’s take a look at the industry’s recent stock market performance and the valuation picture.
Industry Outperforms the Sector and the S&P 500
The Zacks Transportation-Truck industry has surpassed the Zacks S&P 500 composite and the broader Transportation sector over the past year.
The industry has risen 36.5% over this period compared with the S&P 500's appreciation of 32.9% and the broader sector’s uptick of 13.4%.
One-Year Price Performance
Industry's Current Valuation
Based on the trailing 12-month EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization), a commonly used multiple for valuing trucking stocks, the industry is currently trading at 15.6X compared with the S&P 500’s 14.87X. It is also above the sector’s EV/EBITDA of 11.74X.
Over the past five years, the industry has traded as high as 15.75X and as low as 6.79X, with the median being 10.39X, as the chart below shows.
Enterprise Value-to-EBITDA Ratio (TTM)
3 Transport Truck Stocks to Watch
Covenant Logistics offers a portfolio of transportation and logistics services, including asset-based expedited, dedicated and irregular route truckload capacity along with asset-light warehousing, transportation management and freight brokerage capability.
CVLG’s cost-control efforts are appreciated. CVLG currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for Covenant Logistics’ 2024 earnings has been revised 1.2% upward over the past 60 days.
Price and Consensus: CVLG
ArcBest: Based in Fort Smith, AK, ARCB provides freight transportation services and solutions. Favorable pricing is driving growth across ArcBest’s Asset-Based and Asset-Light segments. ARCB’s MoLo Solutions acquisition enhanced the operations of the ArcBest segment by boosting shipments at the truckload services unit.
Efforts to control costs also bode well. Shares of ARCB have surged 47.6% in a year. ARCB currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Price and Consensus: ARCB
J.B. Hunt: J.B. Hunt Transport Services provides a broad range of transportation services to a diverse group of customers in the United States, Canada and Mexico. JBHT is benefiting from efforts to reward its shareholders through dividend payments and share repurchases.
J.B. Hunt’s efforts aimed at controlling costs bode well. Shares of JBHT have surged 19.4% in a year. JBHT currently carries a Zacks Rank of 3.
Price and Consensus: JBHT