Trucking stocks in 2021: profits on the road?

We often talk about the e-commerce surge with people buying even more goods since less money can be spent on services. Let us not forget about one element of the supply chain making all of this possible: transport, and more specifically, trucking companies.

A smooth transition into a better year and what it means for trucking stocks

This was a bad year, let us admit it. Most of us had to cancel plans, limit travel and socializing. But let us not dwell on the past, because, according to many analysts, 2021 is set to be a much better year for us. And trucks have a role to play.

2020 certainly was a good year for trucking companies. E-commerce and last mile deliveries largely compensated the low industrial demand. With the pandemic not quite over yet, these segments are expected to do as well in 2021, at least for the first half of the year. At the same time, industrial demand will most likely pick up too, which will mean more cargo to transport for trucks in general. Indeed, the same factors that are negatively impacting the retail sector are fueling the demand for the logistics market.

Furthermore, widespread vaccination will take 6 months at least – that is, if everybody accepts to get a vaccine – so real spending patterns will not change much before then. Of course, the time where people will be able to get out and spend their money at bars, restaurant and various services will mean a reduced budget for goods, which will naturally impair the sector.

 

Truck Stocks

A higher demand and too few truck drivers

The US specifically saw an issue of a ‘driver crunch’ meaning that they do not have enough truck drivers anymore. Fewer signed up for driving school amidst the pandemic – due to social distancing measures for instance – but the state also reinforced the federal Drug and Alcohol Clearinghouse’s requirements. Many drivers either did not pass the test or have not done it for fear of failing it. The legalization of marijuana in many states also has not helped. This has influenced the truck driver job market and services. On the one hand, the salary increased as the qualification became scarcer, but on the other hand, so did contract prices, good news for companies.

 

Truck freight outlook (Source: FTR)

Truck freight outlook (Source: FTR)

 

If we have a look at the overall market the FTR predicts a 5% increase in trucking volume this year, from a 4% decline last year. Despite many possible scenarios and uncertainties, the overall outlook for trucking stocks seems quite positive. The overall forecast is expected to reach around 8%, with contract rates expected to surge as much as 10%.

Overall, a tighter job market along with increased volume and demand should translate to higher rates and higher profits for trucking companies in general.

 

New heavy truck order activity (Source: FTR)

New heavy truck order activity (Source: FTR)

Stocks and ETF in the American Trucking Industry

While we have talked a lot about fancy electric – or even self-driving – truck companies, let us not forget that most of the transport is carried out – and will be for a moment still – by classical truck freights. There are many trucking stocks to choose from. Zacks Research suggests the following 5 as their best picks:

 

  • ArcBest Corp.  : the Arkansas Best Corporation is a multibillion-dollar freight and logistics company founded in 1923 that proposes complex supply chain solutions. They have an expected revenue and earnings growth rate of 8.9% and 20.9% respectively, as well as earnings EPS of 0.95%.
  • USA Truck, Inc. : founded in 1983, the USA Truck is a contract carrier company that specializes in the truckload quantities of general commodities. They have an expected revenue and earnings growth rate of 12.4% and 217.1% respectively, as well as earnings EPS of 0.95%. They’ve been rated with a strong buy by Zacks Research.
  • Marten Transport, Ltd. : Marten Transport is a long-haul truckload carried with a specialization in protective services and time-sensitive transportation, with goods such as food and other products requiring temperature-controlled or insulated carriage. They have an expected revenue and earnings growth rates of 7.2% and 15.0% respectively, in addition to a strong buy rating as well.
  • A.M. Transportation Services, Inc. : Active in 48 states in the US as well as in the southern parts of Ontario, Canada, P.A.M. Transportation Services was founded in 1980. They specialize in long haul transport. Like Marten, they received a strong buy rating in addition to a expected growth revenue for the year of 13.9% and earnings expected to grow 94.6%.
  • Saia, Inc. : Largely active in the southern part of the United States, Saia has a 3.1% earning ESP, a expected revenue growth of 10.3% and expected earnings growth of 26.6%.

 

The Street also regularly updates its stock recommendations each year for various industries. Here are the top 10 best trucking companies according to their ratings:

 

Equity

Rating

OLD DOMINION FREIGHT 

A

LANDSTAR SYSTEM INC 

A-

MODIVCARE INC

A-

SAIA INC

A-

KNIGHT-SWIFT TRPTN HLDGS INC 

B

WERNER ENTERPRISES INC 

B

C H ROBINSON WORLDWIDE INC 

B

ARCBEST CORP 

B

ZTO EXPRESS CAYMAN INC 

B

FORWARD AIR CORP 

B

 

If you cannot make your mind about specific stocks, you of course have the option to invest in an ETF holding shares in various transport companies. Here are some options to choose from.

 

 

trucks

Sources:

Where are Trucking Stocks Headed in 2021?, in Zacks Research

Increased freight, tight capacity to provide trucking tailwinds in 2021, in TruckNews

10 Best Trucking Company Stocks for This Year, in the Street Ratings

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