Trucking Industry Sizzling In 2018

Apr. 17, 2018 8:45 AM ETKNX, ODFL, WERN2 Comments
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Summary

  • In 2017, the trucking industry saw a large increase in spot prices that prompted a rally in trucking stocks.
  • FTS Transportation Intelligence sees strong demand in 2018 with its demand index reaching far above its 5-year average.
  • Knight Transportation, Old Dominion, and Werner Enterprises saw huge year over year growth due to supply shortage and demand growth in 2017.

As first quarter earnings season rolls in, eyes will be on which industries perform fundamentally as the market continues to swing wildly in 2018. In a recent industry report from Morningstar, author Matthew Young suggested that the trucking industry could be an area offering dramatic results as trucking stocks look to extend impressive rallies. Knight Transportation (KNX), Old Dominion Freight Line (ODFL), and Werner Enterprises (WERN), are three trucking stocks that the report focuses on as leaders in this industry.

While Young thinks that the trucking stocks are a bit overheated, higher valuations could be justified with stronger economic growth and fiscal headwinds. These stocks should have further room to run in 2018 as higher demand will favor their bottom lines. At this point, it's about picking the best buy from the bunch.

From Stockcharts.com

Before February 2018, the truckers outperformed the S&P 500 by a considerable amount. KNX and WERN were about 18 percent higher, and ODFL and YRCW were around 35 percent higher. Optimistic economic outlook helped push these company’s shares higher as new tax reform was expected to drive more business spending that would mean more demand in the trucking industry. However, the expansion of these stocks halted with the onset of market volatility.

According to Young, the truckload (TL) and light truckload ((LTL)) industries saw capacity had, “rapidly tightened on accelerating freight demand, carriers’ fleet reductions, and weather disruptions” in the 2 nd half of 2017. With this tightening, trucking companies saw margins skyrocket and “spot prices” approach all time highs. Because this industry oscillates so abruptly with changes in supply and demand, optimism prompted cash to move into trucking shares.

From FTR Transportation

In FTR Transportation Intelligence’s 2018 Trucking Outlook presentation the organization showed many different metrics that indicated the market was going into the

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MTS Insights writes macro content with a focus on economic and financial reports. For more coverage visit my website or follow on Twitter (@MTSInsights).

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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