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.
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.
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)
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)
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:
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 |
A |
|
A- |
|
MODIVCARE INC |
A- |
A- |
|
B |
|
B |
|
B |
|
B |
|
B |
|
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.
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