The trucking industry plays a significant role in transporting goods across regions. The $1 trillion infrastructure bill signed into law by the President on November 15 includes $550 billion in funding for transportation, broadband, and utilities. This could help boost the trucking industry’s prospects. However, supply chain issues pose a concern for the sector’s growth.
Pandemic-induced shortages have caused a jump in consumer prices, driving the highest surge in inflation in more than 30 years. Furthermore, just when supply chain issues were gradually easing, reports of a new coronavirus variant, omicron, are expected to be a spoilsport. In addition, a record truck driver shortage could further exacerbate the supply chain constraints.
Therefore, we think it could be wise to avoid trucking stocks Old Dominion Freight Line, Inc. (ODFL) and Yellow Corporation (YELL). Wall Street analysts expect them to decline in the near term. In addition, they look overvalued at their current price levels.
Old Dominion Freight Line, Inc. (ODFL)
ODFL is a less-than-truckload (LTL) motor carrier company. It offers expedited transportation, LTL, and value-added services, including drayage, truckload brokerage, and supply chain consulting. ODFL is headquartered in Thomasville, N.C.
On September 6, 2021, ODFL announced that although its daily volumes increased in August, their growth was affected by the recent rise in COVID-19 cases and other matters impacting the supply chains across the country.
For its fiscal third quarter, ended September 30, 2021, ODFL’s LTL weight per shipment decreased 4.8% year-over-year to 1,538 lbs. The company’s workdays fell 0.5% year-to-date to 191. Also, its operating expenses increased 29% year-over-year to $1.01 billion.
In terms of forward non-GAAP P/E, ODFL’s 41.10x is 101.2% higher than the 20.43x industry average. The stock’s forward EV/S and P/S of 7.81x and 7.90x, respectively, are higher than the 1.95x and 1.60x industry averages. The stock has gained 3.1% in price over the past month to close Friday’s trading session at $358.98. However, Wall Street analysts expect the stock to hit $326.50 in the near term, indicating a potential 9% decline.
Yellow Corporation (YELL)
Overland Park, Kans.-based YELL provides logistics and less-than-truckload (LTL) networks in North America, with local, regional, national, and international capabilities. The company offers flexible supply chain solutions through which customers can ship industrial, commercial, and retail goods. Its brands include Holland, New Penn, Reddaway, YRC Freight, and HNRY Logistics.
On November 3, YELL’s CEO Darren Hawkins said, “Capacity across the U.S. supply chain remains constricted with limited ability to expand primarily due to the tight labor market.”
YELL’s operating expense for its fiscal third quarter, ended September 30, 2021, increased 7.6% year-over-year to $1.25 billion. The company’s non-operating expenses increased 24.1% year-over-year to $40.10 million. Also, its comprehensive loss came in at $20.50 million compared to comprehensive income of $96 million in the year-ago period.
In terms of forward EV/EBIT, YELL’s 28.72x is higher than the 17.27x industry average. Analysts expect its EPS for its fiscal 2021 to decrease 11.7% year-over-year to $1.43. The stock has gained 42.7% in price over the past month to close Friday’s trading session at $13.27. However, Wall Street analysts expect the stock to hit $12.50 in the near term, indicating a potential 5.8% decline.
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ODFL shares fell $4.71 (-1.31%) in premarket trading Monday. Year-to-date, ODFL has gained 82.04%, versus a 23.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets. More...
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