Heartland Express Has Tools To Offset A Cyclical Trucking Correction

Nov. 08, 2022 2:22 PM ETHeartland Express, Inc. (HTLD)JBHT, KNX, TFII, TFII:CA
Stephen Simpson profile picture
Stephen Simpson
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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.

"Heartland Express" Semi-Truck

DakotaSmith/iStock Editorial via Getty Images

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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Stephen Simpson profile picture
18.39K Followers
Stephen Simpson is a freelance financial writer and investor. Spent close to 15 years on the Street (sell-side, buy-side, equities, bonds); now a semi-retired raccoon rancher. That last part isn't entirely true. Probably.

Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such 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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