5 Most Promising Trucking Stocks to Buy as We Roll Into 2022
InvestorPlace - Stock Market News, Stock Advice & Trading Tips The trucking industry is big business and a vital part of America’s economic engine, which is why these stocks are...
The trucking industry was hit hard by the coronavirus pandemic in 2020. Since then, economic activity has improved, and freight market conditions have stabilized enough for volumes to return to normal gradually. And it’s not a moment too soon. The trucking industry has been an integral part of our economy for decades. It provides transportation for goods and services, generating jobs in manufacturing and logistics. However, the industry has been rocked by a crippling driver shortage. On the bright side, legislators understand how important the industry is to their constituents, which is why sentiment turns bullish on trucking stocks.
More than 60 members of Congress have communicated their concern over driver shortages. The representatives request federal funding for training programs that would help reduce turnover rates among truckers. The freight industry in America is struggling to find enough workers. But increase in federal funding is certainly a step in the right direction.
Regardless, the markets are relearning a key fact. You cannot afford to ignore the trucking sector. Hence, even though several investment segments are generating more interest, the more traditional areas of the economy also deserve your attention. Additionally, the pandemic isn’t over as we hear about a new variant potentially putting a spanner into the works.
Consequently, it is a good time to take a contrarian view and invest in these trucking stocks.
- Landstar System (NASDAQ:LSTR)
- J.B. Hunt Transport (NASDAQ:JBHT)
- Old Dominion Freight Line (NASDAQ:ODFL)
- Knight-Swift Transportation (NYSE:KNX)
- Covenant Logistics Group (NASDAQ:CVLG)
Trucking Stocks to Buy: Landstar System (LSTR)
Landstar System has built its business on the idea that integrated transportation management solutions are needed to get cargo where it needs to go. It offers comprehensive carrier trucking services that provide maximum flexibility for shippers across North America by providing rapid responses to their customers’ needs with minimum impact on overall productivity — all while saving money.
It started recovering from the coronavirus-induced slump in the second half of last year. In the last three quarters, the company has beat analyst expectations by a very healthy margin every time. On Oct. 20, Landstar System posted a record quarterly revenue of $1.734 billion in reporting third-quarter earnings, representing a 60% year-over-year increase. Net income also set new standards with $98.7 million, or diluted earnings per share of $2.58.
The van truckload business was particularly strong for the three months ending September, with demand driven by the company’s diverse capabilities. The biggest revenue spinner is consumer durables, which contributed 30%. You would expect that the next quarter will be even better. After all, the fourth quarter is considered the traditional peak season. Interestingly, Jim Gattoni, Landstar’s president and CEO, believes we are in for a muted quarter.
“Coming into October and the fourth quarter, we are expecting stable seasonal trends. You feel the supply chain disruption and the lack of capacity has leveled off. It’s a strong freight environment and it’s going to remain strong, but it’s not going to go above seasonal norms,” Gattoni said.
Regardless, performance over the last few quarters has been exemplary. There is no reason why the company will not exceed expectations once again. That is why these trucking stocks will continue to do well.
J.B. Hunt Transport (JBHT)
J.B. Hunt is a thoroughbred among transportation stocks. It operates a huger fleet of large semi-trailer trucks. With an impressive performance by its dedicated contract services segment and strong e-commerce demand aiding Final Mile Services, they are sure to be around for a long time.
Much like the other major trucking stocks, J.B. Hunt is riding high due to the resurgence in demand. In the third quarter, it reported net earnings of $199.8 million, a 59% increase over the year-ago period. Total operating revenue for the current quarter was $3.14 billion, an increase of 27% compared with $2.47 billion in 2020’s third quarter. J.B. Hunt said that profits climbed on customer rate and cost-recovery efforts and further implementation of its technology investments. The quarter wasn’t without challenges, though. Rail-network congestion was one of the primary challenges faced by this company. This rail transport industry has seen increased wage and higher costs, significantly affecting their bottom line.
The numbers are impressive considering we are in the middle of a labor shortage, and increased demand has created delays in nationwide supply chains. The holiday season is when the health of supply chains comes into focus. Trucking companies can be seen as important pillars for this vital sector and should take their responsibility seriously to ensure everyone involved has everything they need before it’s too late.
But management is bullish on prospects. John Roberts, J.B. Hunt’s president and chief executive, and the senior management believe the company can adapt and progress in current circumstances. However, investors are not piling into the stock at the moment.
Trucking Stocks to Buy: Old Dominion Freight Line (ODFL)
Old Dominion Freight Line offers logistics and household moving services across the U.S, including less-than-truckload (LTL) as well as specialized ones for goods such as refrigerated trucks or furniture vans. It recently reported excellent earnings for the three-month and nine-month periods ended Sept. 30. The company reported record revenue of $1.4 billion for the quarter, increasing last year’s figure by 32.3%. There was a 15.7% increase in truckload freight shipping (LTL) revenue per hundredweight, while LTL tons jumped 13.7%.
Remarking on the results, ODFL President and CEO Greg Gantt said, “Our operating ratio improved to a Company record of 72.6% for the third quarter of 2021. We improved many of our cost categories as a percent of revenue during the quarter due to the leverage created by our balanced revenue growth as well as improvements in our operating efficiency.”
Net cash from operating activities is at a record high for the third quarter and has already reached $872.6 million for the first nine months of the year. ODFL ended the period with $339.8 million in cash and cash equivalents.
Its excellent cash position has allowed it to maintain a relatively high payout in a constrained environment. For the first nine months, $599 million in stock repurchases and $69.4 million in cash payouts were used to return money into shareholders’ hands.
And the gravy train doesn’t seem to be ending anytime soon. On Oct. 21, the company’s board approved a 20-cents-per-share dividend distribution. Additionally, The truckload shipping company has an accelerated repurchase agreement that will last until March 2022.
Among trucking stocks, ODFL commands a premium. At the time of writing, shares are trading at 34.97 times forward price-to-earnings. Shares are up 73.7% in the last year, so wait for shares to drop a bit before buying more.
Knight-Swift Transportation (KNX)
The world’s largest full truckload carrier, Knight-Swift, results from a 2017 combination of Knight Transportation and Swift Transportations. The company has a huge competitive advantage because it can haul large loads. And there is no need to combine multiple smaller ones into one truck. This means that their service is more valuable and provides it with an excellent way of competing in our current market situation
The company’s revenue is derived from two sources: trucking and logistics services. The depletion in the talent pool and the overall state of the transportation market weighed down results last year. However, it has managed impeccably in this time. Despite tough conditions, its reported earnings beats quarter after quarter. The short-term picture for trucking is not encouraging, with both consolidation and bankruptcies expected to drive excess capacity out of circulation. But the latest numbers will excite investors.
Adjusted earnings per share came in at $1.30, a substantial uptick year on year from 79 cents. It is also healthy growth from the second-quarter figure of 98 cents. It posted excellent sales of $1.64 billion for the quarter, handily outpacing the prior-year figure of $1.21 billion. “We continue to invest in the diversification of our business through our truckload, logistics, intermodal, LTL, and other developing businesses,” Knight-Swift CEO Dave Jackson said when touching upon the subject. He continued that, “This diversification has allowed us to grow revenue and earnings across multiple segments and we expect will lead to earnings growth in 2022.”
It maintained its dividend distribution of 10 cents per share in reporting third-quarter earnings. Again, any company paying out a distribution amid supply chain challenges needs to be applauded. However, investors do not seem to think so. Despite the steady performance, the stock was up just 2% in the last month.
Trucking Stocks to Buy: Covenant Logistics Group (CVLG)
Covenant’s subsidiaries provide a diverse range of solutions, including expedited freight brokerage and warehousing and dedicated route truckload capacity for those who want their shipments delivered quickly with less hassle.
Like the other companies on this list, Covenant had an exemplary third quarter. The company reported record earnings of 97 cents per share and non-GAAP adjusted EPS at an all-time high of $1.02. The average tractors fell 6.2% to 2,370 units from last year’s total. But the revenue per tractor per week grew 14%.
Revenue per tractor per week grew 14% to $4,644, which was upset somewhat by a 6.2% fall in average tractor count at 2,370 units. Miles per tractor decreased 3% from the year-ago period to 28,240. The company is expected to exceed $1 billion in revenue and record its highest annual earnings per share ever this year.
Commenting on the results, Chairman and CEO David Parker said, “In the third quarter we experienced the continuation of an exceptionally strong freight market resulting from growing economic activity, low inventories, and supply chain disruptions, accompanied by constrained capacity due to an intensifying national driver shortage.”
Looking ahead, considering the company is anticipating a record year, and it is trading at just 6.27 times forward price-to-earnings, the time is ripe to intimate a position in CVLG or add to it.
On the publication date, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Faizan Farooque is a contributing author for InvestorPlace.com and numerous other financial sites. Faizan has several years of experience in analyzing the stock market and was a former data journalist at S&P Global Market Intelligence.
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