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3 Truck Stocks to Keep an Eye on From a Challenging Industry
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The Zacks Transportation-Truck industry is grappling with persistent supply-chain disruptions, a challenging macroeconomic environment characterized by inflation-induced high interest rates and truck driver shortages.
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 Knight-Swift Transportation (KNX - Free Report) , Werner Enterprises (WERN - Free Report) and Covenant Logistics (CVLG - Free Report) .
Industry Description
The Zacks Transportation - Truck industry houses truck operators transporting freight to diverse customers across North America. These companies provide full-truckload or less-than-truckload (LTL) services over the short, medium or long haul. The range of trucking services these companies provide includes dry-van, dedicated, refrigerated, flatbed and expedited. Some companies have an extensive fleet of company-owned tractors and trucks and independent contractor trucks. Alongside 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 other 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 1.1% year over year in July. This measure has deteriorated year over year in each of the last six months, which confirms 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 via dividends and buybacks to pacify long-suffering shareholders. This underlines their financial strength and confidence in the business. Among the players in the Trucking industry, KNX 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. Driver scarcity issues limit trucking capacity, making it difficult for trucking companies to meet increased freight demand. 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 Transportationsector. The industry currently carries a Zacks Industry Rank #235, which places it in the bottom 6% of 250 plus 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 outperform 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 estimate for 2024 has decreased 31.4% on a year-over-year basis.
Before we present a few stocks from the industry that you may want to hold on to, let’s take a look at the industry’s recent stock market performance and the valuation picture.
Truck Industry Underperforms the S&P 500 & Sector
The Zacks Transportation-Truck industry has lagged the Zacks S&P 500 composite as well as the Transportation sector over the past year.
The industry has risen 2.2% over this period compared with the S&P 500's appreciation of 27% and the broader sector’s uptick of 2.3%.
One-Year Price Performance
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 14.31X compared with the S&P 500’s 18.94X. It is also above the sector’s EV/EBITDA of 11.03X.
Over the past five years, the industry has traded as high as 15.8X and as low as 7.56X, with the median being 12.07X, as the chart below shows.
Enterprise Value-to-EBITDA Ratio (TTM)
3 Transport Truck Stocks to Consider
Knight-Swift: This truckload carrier is based in Phoenix, AZ. Knight-Swift’s efforts to reward its investors through dividends and buybacks bode well. In February 2024, the company's board of directors approved a dividend hike of 14.2% to 16 cents per share.
Headquartered in Omaha, NE, Werner Enterprises’ efforts to reward its shareholders through dividends and share repurchases are commendable. The company’s liquidity position is good.
WERN’s cost-control efforts are praiseworthy. WERN currently carries a Zacks Rank #3. The Zacks Consensus Estimate for current-year earnings has remained stable over the past seven days.
Price and Consensus: WERN
Covenant Logistics offers a portfolio of transportation and logistics services, including asset-based expedited, dedicated and irregular route truckload capacity, along with asset-light warehousing, transportation management and freight brokerage capability.
CVLG’s cost-control efforts are appreciated. CVLG currently carries a Zacks Rank #3. The company has surpassed the Zacks Consensus Estimate for earnings in each of the last four quarters. The average beat is 3.99%.
Price and Consensus: CVLG
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3 Truck Stocks to Keep an Eye on From a Challenging Industry
The Zacks Transportation-Truck industry is grappling with persistent supply-chain disruptions, a challenging macroeconomic environment characterized by inflation-induced high interest rates and truck driver shortages.
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 Knight-Swift Transportation (KNX - Free Report) , Werner Enterprises (WERN - Free Report) and Covenant Logistics (CVLG - Free Report) .
Industry Description
The Zacks Transportation - Truck industry houses truck operators transporting freight to diverse customers across North America. These companies provide full-truckload or less-than-truckload (LTL) services over the short, medium or long haul. The range of trucking services these companies provide includes dry-van, dedicated, refrigerated, flatbed and expedited. Some companies have an extensive fleet of company-owned tractors and trucks and independent contractor trucks. Alongside 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 other 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 1.1% year over year in July. This measure has deteriorated year over year in each of the last six months, which confirms 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 via dividends and buybacks to pacify long-suffering shareholders. This underlines their financial strength and confidence in the business. Among the players in the Trucking industry, KNX 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. Driver scarcity issues limit trucking capacity, making it difficult for trucking companies to meet increased freight demand. 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 #235, which places it in the bottom 6% of 250 plus 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 outperform 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 estimate for 2024 has decreased 31.4% on a year-over-year basis.
Before we present a few stocks from the industry that you may want to hold on to, let’s take a look at the industry’s recent stock market performance and the valuation picture.
Truck Industry Underperforms the S&P 500 & Sector
The Zacks Transportation-Truck industry has lagged the Zacks S&P 500 composite as well as the Transportation sector over the past year.
The industry has risen 2.2% over this period compared with the S&P 500's appreciation of 27% and the broader sector’s uptick of 2.3%.
One-Year Price Performance
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 14.31X compared with the S&P 500’s 18.94X. It is also above the sector’s EV/EBITDA of 11.03X.
Over the past five years, the industry has traded as high as 15.8X and as low as 7.56X, with the median being 12.07X, as the chart below shows.
Enterprise Value-to-EBITDA Ratio (TTM)
3 Transport Truck Stocks to Consider
Knight-Swift: This truckload carrier is based in Phoenix, AZ. Knight-Swift’s efforts to reward its investors through dividends and buybacks bode well. In February 2024, the company'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 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: KNX
Headquartered in Omaha, NE, Werner Enterprises’ efforts to reward its shareholders through dividends and share repurchases are commendable. The company’s liquidity position is good.
WERN’s cost-control efforts are praiseworthy. WERN currently carries a Zacks Rank #3. The Zacks Consensus Estimate for current-year earnings has remained stable over the past seven days.
Price and Consensus: WERN
Covenant Logistics offers a portfolio of transportation and logistics services, including asset-based expedited, dedicated and irregular route truckload capacity, along with asset-light warehousing, transportation management and freight brokerage capability.
CVLG’s cost-control efforts are appreciated. CVLG currently carries a Zacks Rank #3. The company has surpassed the Zacks Consensus Estimate for earnings in each of the last four quarters. The average beat is 3.99%.
Price and Consensus: CVLG