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4 Trucking Stocks to Buy as Freight Scene Continues to Improve

After bearing the brunt of the coronavirus pandemic in the first half of 2020, the trucking industry has been on the road to recovery since the second half of 2020. As economic activities ramped up and freight market conditions improved, the trucking companies started witnessing gradual improvement in volumes.

Load Error The recovery picked up pace in 2021 as the US economy continued to improve on increased vaccinations.

The American Trucking Associations’ (“ATA”) advanced seasonally adjusted For-Hire Truck Tonnage index increased on a year-over-year basis in April, for the first time since March 2020. The index climbed 6.9% in April from the year-ago level. While the year-ago period was characterized by a dramatic drop in truck freight volumes as several countries imposed lockdowns to curb the spread of coronavirus, the upward movement of the index signals the beginning of further increases in the days ahead, as inferred from ATA Chief Economist Bob Costello’s words.

Regarding April’s truck tonnage index Costello stated, “I’m expecting increases, albeit smaller than April’s, on a year-over-year basis going forward. Trucking’s biggest challenges are not on the demand side, but on the supply side, including difficulty finding qualified drivers.” He also stated that, “The outlook is solid for tonnage going forward as the country approaches pre-pandemic levels of activity, with strong economic growth in key areas for trucking – including retail, home construction and even manufacturing.” With freight demand continually improving and capacity constraints prevailing, trucking rates are on the rise.

This, in turn, is boosting the top line of trucking companies. According to Cass Freight Index April report, freight rates increased 13.7% year over year in April. Amid strong freight demand and supply constraints, “spot and contract rates should continue to rise”, the report stated.

The upbeat scenario is quite evident from the Zacks Transportation – Truck industry’s performance, which comfortably outperformed both the broader Transportation sector and S&P 500 index in the year-to-date period. Over this period, the industry has rallied 24.1%, compared with the broader sector and the S&P 500 index’s rise of 13% and 13.3%, respectively.

Year-to-Date Price Performance

(C) Provided by Zacks.com Zacks Investment Research Image Source: Zacks Investment Research

 

4 Top Trucking Stocks to Buy

Against the buoyant backdrop, it would be wise to invest in some prominent trucking stocks, which carry a Zacks Rank #1 (Strong Buy) or 2 (Buy) and have favorable earnings estimate revisions. You can see the complete list of today’s Zacks #1 Rank stocks here.

Landstar System LSTR is an asset-light provider of integrated transportation management solutions, headquartered in Jacksonville, FL. With gradual improvement in freight market conditions, the company, sporting a Zacks Rank #1, started recovering from the coronavirus-induced slump in the second half of 2020. Evidently, the company’s top and the bottom lines improved substantially in each subsequent quarter beginning from the third quarter of 2020, owing to robust revenues generated from the primary segment — truck transportation.

Strong demand in the van truckload business drove segmental revenues. Higher truck rates courtesy of tight truck capacity also aided performance. The company anticipates favorable market conditions, such as strong consumer demand and tight truck capacity, to continue.

The Zacks Consensus Estimate for Landstar’s 2021 earnings has been revised upward by 30.5% in the past 60 days. Covenant Logistics Group CVLG offers transportation and logistics services, through its subsidiaries. The company is based in Chattanooga, TN.

The company’s initiatives to reduce fixed costs and increase asset utilization should drive the bottom line going forward. With improved freight scenario, the company is benefiting from strong performance of the Managed Freight segment. This stock sports a Zacks Rank #1.

The Zacks Consensus Estimate for the company’s 2021 earnings has been revised northward by 27.1% in the past 60 days. Old Dominion Freight Line ODFL is a leading LTL (Less-Than-Truckload) company, based in Thomasville, NC. Consistent improvement in the company’s operating ratio (operating expenses as a percentage of revenues) is encouraging.

After improving to 77.4% in 2020 from the year-ago level of 80.1%, this key metric bettered 530 basis points to 76.1% in first-quarter 2021 on the back of higher revenues. With favorable market conditions, the metric should continue to improve. This stock carries a Zacks Rank #2.

The Zacks Consensus Estimate for the company’s 2021 earnings has been revised northward by 9.1% in the past 60 days. J.B. Hunt Transport Services JBHT provides a broad range of transportation services to a diverse group of customers across the United States, Canada and Mexico.

It is based in Lowell, AR. The company, carrying a Zacks Rank #2, is benefiting from impressive performance of the Dedicated Contract Services segment. Additionally, strong e-commerce demand is aiding the Final Mile Services segment.

The Zacks Consensus Estimate for the company’s 2021 earnings has been revised upward by 7.3% in the past 60 days.

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