Trucking freight volumes have been recovering at an accelerated pace over the past couple of months, benefiting from the faster-than-expected macroeconomic recovery. Industrial production increased slightly in June, while utility output rose 2.7%. Total industrial production increased 9.8% year-over-year to 101.1% of its 2017 average in June.
Consequently, freight demand has increased significantly over the past couple of months, outpacing the trucking industry’s ability to attract drivers and acquire new equipment. With spot truckload rates near all-time highs and strengthening contract truckload rates, the U.S. trucking industry is poised to grow significantly in the near term.
Given this backdrop, we believe trucking stocks Old Dominion Freight Line, Inc. (ODFL), Knight-Swift Transportation Holdings Inc. (KNX), and ArcBest Corporation (ARCB) could deliver substantial returns in the coming months.
Old Dominion Freight Line, Inc. (ODFL)
The company provides regional, inter-regional and national less-than-truckload (LTL) motor services in North America. It also provides value-added services like container drayage, truckload brokerage, and supply chain consultation. ODFL is based in Thomasville, N.C.
ODFL’s revenues per day increased 47.6% year-over-year in May 2021. This can be attributed to a 28.3% rise in less-than-truckload (LTL) tons per day and a 32.6% increase in LTL shipments per day. The company’s quarter-to-date revenue performance has been above its normal sequential trend, reflecting its growing market share. ODFL aims to expand its service center network this year, which, in turn, is expected to ensure long-term market share growth and a substantial rise in shareholder returns. ODFL paid $0.20 as quarterly dividends in June, up 33.3% from the same period last year.
ODFL’s total revenues increased 14.1% year-over-year to $1.13 billion in its fiscal first quarter ended March 31. Its operating profit grew 47.2% from its year-ago value to $269.67 million, while its net income improved 49.7% year-over-year to $199.36 million. Its EPS increased 53.2% from its year-ago value to $1.70.
A $2.09 consensus EPS estimate for its fiscal second quarter (ended June 2021) represents a 67.2% improvement year-over-year. ODFL has an impressive earnings surprise history also; it beat Street EPS estimates in each of the trailing four quarters. Analysts expect revenues to come in at $1.23 billion in the about-to-be-reported quarter, indicating a 37.3% rise from the same period last year. Over the past year, the stock has gained 34.2% to close yesterday’s trading session at $250.15.
ODFL’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
ODFL has an A grade for Quality, and B for Stability. Of the 23 stocks in the A-rated Trucking Freight industry, it is ranked #10.
To see additional ODFL ratings for Growth, Value, Sentiment, and Momentum, click here.
Knight-Swift Transportation Holdings Inc. (KNX)
KNX in Phoenix, Ariz., provides truckload transportation services in the United States, Mexico, and Canada. The company operates through three segments: Trucking, Logistics, and Intermodal.
On July 6, KNX acquired LTL carrier AAA Cooper Transportation for $1.35 billion. Regarding this, KNX CEO Dave Jackson said, “In seeking our first LTL partner, we had three main requirements–the scale for entry with significant market share, the profitability, and management depth to operate independently and provide a platform for compelling growth opportunities, and world-class culture. We were excited to have identified AAA Cooper as a partner that meets all three requirements.”
On June 1, KNX acquired 100% equity interests in premier third-party logistics company UTXL, Inc. for $22.50 million. UTXL’s customer-specific solutions are expected to boost KNX’s transportation services significantly.
KNX’s revenues increased 8.7% year-over-year to $1.22 billion in its fiscal first quarter ended March 31. Its operating profit grew 58.9% from its year-ago value to $162.26 million, while its net income improved 98.4% year-over-year to $129.79 million. Its EPS increased 102.6% from its year-ago value to $0.77.
The Street expects KNX’s revenues to rise 14.1% year-over-year to $5.33 billion in its fiscal year 2021. The company’s EPS is expected to be $3.64 in the current year, indicating a 33.3% improvement from the same period last year. Also, KNX beat the Street’s EPS estimates in each of the trailing four quarters. The stock has gained 13.2% year-to-date.
KNX’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which translates to Buy in our proprietary rating system.
KNX has a grade of B for Growth. It is ranked #8 in the Trucking Freight industry.
To see additional KNX ratings for Value, Momentum, Stability, Sentiment, and Quality, click here.
ArcBest Corporation (ARCB)
Fort Smith, Ariz.-based ARCB provides freight transportation and integrated logistics services. The company operates through three segments: Asset-Based, ArcBest, and FleetNet. It has an ISS Governance QualityScore of 3, indicating relatively low governance risk.
Five of ARBC’s Freight service centers received the President’s Quality award on April 1, which is the highest accolade companies operating in this space can achieve. The award reflects ARBC’s quality products and customer service.
ARCB’s revenues increased 18.2% year-over-year to $829.21 million in the first quarter ended March 31. Its operating income came in at $32.19 million, up 311.7% from the same period last year. Its net income and EPS increased 1,128.2% and 1,142.9%, respectively, from the prior-year quarter to $23.36 million and $0.87.
Analysts expect ARCB’s revenues to increase 42.6% year over year to $915.95 million in the about-to-be-reported quarter ended June 2021. A $1.61 consensus EPS estimate for the fiscal second quarter represents a 140.3% increase from the same period last year. Furthermore , ARCB beat the consensus EPS estimates in three out of the trailing four quarters. ARCB has gained 73.5% over the past year and 25.9% year-to-date.
ARCB’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. ARCB has an A grade for Growth, and B for Value. It is ranked #3 in the Trucking Freight industry.
View additional ARCB ratings for Momentum, Stability, Sentiment, and Quality here.
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ODFL shares were trading at $252.65 per share on Tuesday afternoon, up $2.50 (+1.00%). Year-to-date, ODFL has gained 29.66%, versus a 16.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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