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Inflection point seen for Canadian trucking sector

Demand is beginning to overtake supply in the Canadian trucking sector, providing carriers with more pricing power that should translate into stronger results, RBC Capital Markets said on Thursday.

Analyst Walter Spracklin sees the demand/supply inflection point approaching after recent discussions with private trucking companies. The optimistic outlook stems from the industry s three pillars of profitability: volume, capacity and price.

He raised his earnings estimates for several Canadian trucking names, resulting in price target hikes for Contrans Group Inc. to $17 (from $15), TransForce Inc. to $29 (from $27) and Trimac Transportation Ltd. to $8 (from $7).

Mr. Spracklin considers TransForce and Contrans best positioned to benefit from improving sector fundamentals.

As the largest carrier in Canada, TransForce, we believe, is well positioned to benefit from strengthening volume, capacity, and price trends in the truck industry, the analyst said, adding the company should garner significant earnings upside from the integration of recent acquisitions.

He also believes Contrans has an edge as industry conditions improve since the truckload market typically leads the recovery in the overall trucking sector.

Furthermore, we consider Contrans to be best-in-class from an execution perspective and we expect the company to capitalize on operating efficiencies afforded by higher volumes, Mr. Spracklin said.

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