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3 Truck Stocks to Keep an Eye on Despite Industry Hiccups
The Zacks Transportation-Truck industry faces headwinds from inflation-induced elevated interest rates, weak freight rates, driver shortages and lingering supply-chain disruptions.
Despite macroeconomic challenges causing uncertainty in demand, the industry demonstrates resilience, especially for companies prioritizing growth and operational efficiency. Among the companies in the industry that are likely to survive the challenges are J.B. Hunt Transport Services JBHT, Saia SAIA and Knight-Swift Transportation KNX.
Industry Description
The Zacks Transportation - Truck industry houses truck operators transporting freight to diverse customers, mainly across North America. These companies provide full-truckload or less-than-truckload services over the short, medium or long haul. The range of trucking services these companies offer includes dry-van, dedicated, refrigerated, flatbed and expedited. Some companies have an extensive fleet of company-owned tractors and trucks and independent contractor trucks. Besides trucking, most entities offer logistics and intermodal services as well as value-added services like container drayage, truckload brokerage, supply-chain consulting and warehousing. A few also offer asset-light services to third-party logistics companies in the transportation sector.
3 Trends Shaping the Future of the Trucking Industry
Supply-Chain Disruptions & Weak Freight Rates: Although economic activities picked up from the pandemic gloom, supply-chain disruptions continue to dent stocks in the industry. Below-par freight rates are also hurting the industry’s prospects. Highlighting the weak freight demand, the Cass Freight Shipments Index declined 2.4% year over year in October. This measure has deteriorated year over year in the last eight months, confirming the overall declining trend.
Strong Financial Returns for Shareholders: With economic activities gaining pace from the pandemic lows, more companies are allocating their increasing cash pile through dividends and buybacks to pacify long-suffering shareholders. This underlines their financial strength and business confidence. Among the players in the Trucking industry, JBHT announced an increase in the quarterly dividend this year.
Prolonged Truck-Driver Shortage: The persistent driver crisis in the trucking industry is worsening supply-chain challenges across the United States. American Trucking Associations’ chief economist, Bob Costello, expects the trucking industry to be short of more than 160,000 drivers by 2030.
Zacks Industry Rank Indicates Dull Prospects
The Zacks Transportation - Truck industry is a 13-stock group within the broader Zacks Transportation sector. The industry currently carries a Zacks Industry Rank #233, which places it in the bottom 6% of 249 Zacks industries.
The group’s Zacks Industry Rank, the average of the Zacks Rank of all member stocks, indicates dismal near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential. The industry's earnings estimates for 2025 have decreased 34% from the 2024 estimates.
Before we present a few stocks from the industry that you may want to hold on to, let us take a look at the industry’s recent stock market performance and the valuation picture.
Truck Industry Underperforms S&P 500, Outperforms Sector
The Zacks Transportation-Truck industry has lagged the Zacks S&P 500 composite but has surpassed the Transportation sector over the past year.
The industry has gained 11.7% over this period compared with the S&P 500's appreciation of 29.2% and the broader sector’s uptick of 10.4%.
One-Year Price Performance
Truck Industry's Current Valuation
Based on the trailing 12-month EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization), a commonly used multiple for valuing trucking stocks, the industry is currently trading at 15.44X compared with the S&P 500’s 18.22X. It is also above the sector’s EV/EBITDA of 11.38X.
Over the past five years, the industry has traded as high as 16.48X and as low as 7.56X, with the median being 12.29X, as the chart below shows.
Enterprise Value-to-EBITDA Ratio (TTM)
3 Transport Truck Stocks to Keep an Eye on
J.B. Hunt provides a broad range of transportation services to a diverse group of customers in the United States, Canada and Mexico. JBHT has been benefiting from efforts to reward its shareholders through dividend payments and share repurchases.
J.B. Hunt’s efforts to control costs bode well. JBHT shares have gained 12.1% in the past six months. JBHT currently carries a Zacks Rank # 3 (Hold).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: JBHT
Knight-Swift is based in Phoenix, AZ. This truckload carrier’s efforts to reward its investors through dividends and buybacks bode well. In February 2024, KNX's board of directors approved a dividend hike of 14.2% to 16 cents per share.
Knight-Swift’s cash position is worrisome. KNX currently carries a Zacks Rank of 3.
Price and Consensus: KNX
Saia is a leading transportation provider that offers multi-regional less-than-truckload, non-asset truckload, expedited and logistics services. Increased revenue per shipment and tonnage due to strong shipper demand and improved pricing are driving SAIA’s top line.
The company’s focus on pricing initiatives, cost-control measures and improving operating efficiency has been supporting its bottom line. Due to these tailwinds, SAIA shares have rallied 30% in the past six months. SAIA currently carries a Zacks Rank of 3.
Price and Consensus: SAIA
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