Trucking stocks are bouncing back strong after hitting a rough patch over the last week.
"I think today’s strength is simply a reversal of the recent stock underperformance of the truckers since peaking in early December, as well as a recognition that 4Q-end trends in December were solid, particularly in truckload," Baird analyst Benjamin Hartford tells Bloomberg.
Thge list of notable gainers includes YRC Worldwide (YRCW +6.5%), Patriot Transportation (PATI +5.5%), Covenant Transportation Group (CVTI +5.1%), USA Truck (USAK +4.8%), Marten Transport (MRTN +3.7%), ArcBest Corporation (ARCB +4%), Celadon Group (CGI +3.8%), Echo Global Logistics (ECHO +3.4%), Heartland Express (HTLD +2.2%) and Landstar System (LSTR +1.6%).
The trucking industry is anxiously waiting for the release of key heavy-duty truck order releases next week as it assesses demand for 2017.
Overcapacity has impacted trucking pricing this year and forced several companies to idle parts of their fleets and rethink strategy. More than half of trucking stocks with a market cap of over $50M are showing a negative YTD return.
There's a sense that the extended downturn in freight demand could be bottoming out, a theory that could be confirmed by the upcoming reports from ACT Research and FTR.
Looking further down the road, it can't be ignored that autonomous vehicle technology could have an impact with trucking services, logistics firms and truck makers. The dramatic delivery of 50K Budweisers (NYSE:BUD) by self-driving transport company Otto (Private:UBER) is considered by some analysts as much more than a publicity stunt.
Ford (NYSE:F) announced last summer that it's developing smaller self-driving delivery trucks and Google has a USPTO-approved patent on a self-driving delivery truck. On the long-haul side, Daimler's (OTCPK:DDAIF) Freightliner is still testing autonomous 18-wheelers.
The trucking stocks is revving higher after solid earnings reports from Swift Transportation (SWFT +12.4%) and Werner Enterprises (WERN +4.8%). Though quarterly profit dropped at both companies, commentary from management indicated the freight market is poised to improve.
Notable movers include Covenant Transportation Group (CVTI +7.9%), Celadon Group (CGI +4.7%), Heartland Express (HTLD +4%), Knight Transportation (KNX +3.9%), and Old Dominion Freight Line (ODFL +3.1%).
Shares of most trucking companies have been rising since mid-January, but several trucking industry research groups have said capacity in the market remains relatively plentiful, giving shipping customers more leverage.
Shares of USA Truck (NASDAQ:USAK), which was cut to Sell from Hold ended -11.1%; Hub Group (HUBG -4.6%), Marten Transport (MRTN -6%) and Universal Truckload (UACL -5.2%) were downgraded to Hold from Buy.
Other stocks in the sector also fell, including KNX -2.4%, SWFT -3.8%, WERN -2.5%, HTLD -1.8%, CVTI -3.6%, RRTS -2.8% and CGI -2.1%.
Avondale Partners sees a tough road to higher earnings for the trucking sector due largely to deteriorating macro factors.
New capacity coming online just as demand weakens doesn't bode well for pricing, according to the boutique investment firm.
Cautions is raised on Swift Transportation (SWFT -3.7%), Celadon Group (CGI -5.4%), Covenant Transportation Group (CVTI -8.3%), J.B. Hunt Transport Services (JBHT +0.2%), Knight Transportation (KNX -3%), Marten Transport (MRTN -0.1%), USA Truck (USAK -0.6%), and Werner Enterprises (WERN -3.2%).