Back to top

4 Trucking Stocks to Drive Into Earnings Beat in Q1

Read MoreHide Full Article

The U.S. trucking industry witnessed gradual improvement in 2017. As the U.S. economy continues to grow, demand for carriage is also increasing and this momentum is expected to be sustained in 2018. The trucking industry is the lifeblood of the economy as it moves more than 70% of the nation’s freight by volume.

In its 2017-2018 Freight Transportation Forecast, the American Trucking Association ("ATA") has predicted that there will be persistent growth for truckers driven by manufacturing, consumer spending and international trade over the next 12 years.

A robust U.S. economy, healthy consumer and business confidence, massive tax haul and business friendly policies of the government are anticipated to fuel trucking industry’s growth. Let us, focus on trucking stocks positioned to report upbeat earnings results, which will eventually lead to an uptick in share price.

Robust ATA Projection

The ATA has projected that from 2018 to 2023, the freight volume growth rate will be 3.4% per annum. For 2017, ATA estimated that 15.18 billion tons of freight was moved by all modes. The figure will rise 36.6% to 20.73 billion tons in 2028. Goods hauled by both truckload and less-than-truckload (LTL) operators will rise by an average 3% per annum over the next five days.

Truck transport is a “derived demand” industry, which means demand for truckers depends on the demand for the products that trucks haul. Consequently, trucking serves as a barometer of the U.S. economy. According to ATA, trucking revenues is likely to grow 5.4% annually between 2018 and 2023 and are expected to reach $1 trillion by 2024.

Massive Tax Overhaul

The overall economic outlook has been fairly bullish fueled by President Trump’s proposed policy changes. The proposal to reduce corporate taxes from the current 35% to 21% is likely to bring corporate tax rate to its lowest level in 78 years.

Trucking companies book much of their revenues within the United States. Consequently, a significant reduction in corporate tax rate faced by these companies would be immediately accretive to cash flow. Trump has also promised removing 75% of the regulations during his tenure, which is likely to help private employers.

Strong U.S. Economy

On Mar 21, the Fed raised GDP growth forecast for 2018 to 2.7% from 2.5% in December 2017. A survey among economists conducted by The Wall Street Journal predicted U.S. GDP would rise 2.8% in 2018.

For March, the Conference Board's measure of consumer confidence index stands at 127.7, the second highest since November 2017. Business sentiment also remains healthy. Under Trump’s presidency, the U.S. manufacturing sector is witnessing strong business spending at factories for expensive durable items such as machinery and vehicles.

A robust job market, massive tax cuts and solid economic data are likely to increase consumer spending in the months to come. Meanwhile, strong domestic and global economic conditions along with favorable government policies will pave the way for long-term growth of the manufacturing sector. Both of these will bolster demand for truckers.

Zacks Favors Transportation -Truck Industry

The Truck Transportation industry is currently in a strong position from the Zacks Industry Rank perspective. The industry is currently in the top 10% (25 out of 256) of the Zacks categorized industries, suggesting it is well-positioned. Historically, the top 50% of the Zacks Ranked Industries outperforms the bottom 50% by a factor of more than 2 to 1.

For the Transportation sector, of which the trucking industry is a major earnings contributor, total Q1 earnings are expected to be up 14.3% from the same period last year on 7.5% higher revenues. This would follow 3.5% earnings growth in the preceding quarter on 8.6% higher revenues (Read More: Bank Earnings in the Spotlight).

Our Picks

The manufacturing sector accounts for nearly 12% of the U.S. GDP and consumer spending accounts for about 70% of U.S. economic activity.  In fact, strong manufacturing goods orders are normally associated with stronger economic activity, which will eventually drive the demand for truckers.

We have selected four trucking stocks, which are expected to report a significant uptick in Q1 earnings. These stocks have a positive Earnings ESP — our proprietary methodology for determining stocks that have the best chance to surprise with their next earnings announcement. It provides the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.

Chart below depicts the price performance of our four picks in last six months.



 

Landstar System Inc. (LSTR - Free Report) delivers safe, specialized transportation services to a broad range of customers utilizing a network of agents, third-party capacity owners and employees.

Landstar System will release first-quarter 2018 earnings results on Apr 25. The company has expected earnings growth of 46.9% for current year. The Zacks Consensus Estimate for the current year has improved by 7% over the last 30 days. It has an Earnings ESP of + 1.22%. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank  stocks here.

Old Dominion Freight Line Inc. (ODFL - Free Report) is a leading, LTL, union-free company providing super-regional and national LTL service.

The company carries a Zacks Rank #2 (Buy). It has an Earnings ESP of + 3.6%.

Old Dominion will release first-quarter 2018 earnings results on Apr 26. The company has expected earnings growth of 43.8% for current year. The Zacks Consensus Estimate for the current year has improved by 0.5% over the last 30 days.

ArcBest Corp. (ARCB - Free Report) provides freight transportation services and solutions across the country and internationally.

The company has a Zacks Rank #2 and an Earnings ESP of + 34.5%.

ArcBest will release first-quarter 2018 earnings results on May 10. The company has expected earnings growth of 72.9% for current year. The Zacks Consensus Estimate for the current year has improved by 0.9% over the last 30 days.

Saia Inc. (SAIA - Free Report) is a leading LTL transportation company that provides a variety of trucking transportation and supply chain solutions to a broad range of industries.

The company has a Zacks Rank #2 and an Earnings ESP of + 1.6%.

Saia will release first-quarter 2018 earnings results on Apr 27. The company has expected earnings growth of 69.9% for current year. The Zacks Consensus Estimate for the current year has improved by 0.3% over the last 30 days.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>



More from Zacks Analyst Blog

You May Like