Heartland Express Has Tools To Offset A Cyclical Trucking Correction

Summary

• Heartland posted mixed third quarter results, with better revenue and weaker operating ratio than expected, but in-line EPS.
• Management acknowledged signs of weakness in the freight market, but believes they will still see single-digit contract price increases in 2023, as well as expense synergies from recent M&A.
• Given that spot rates and other industry metrics are rolling over, assumptions about 2023 could be a little optimistic, but I like the long-term potential of the CFI acquisition.
• It's risky to buy into the start of a cyclical downturn, but Heartland's valuation seems to embed a more serious correction and/or weaker recovery/long-term outlook than I think is likely.

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Times are starting to get tough in the trucking industry. High channel inventories and weakening end-user demand are undermining the demand side of the equation and there is now significantly more capacity in the market. With

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