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Knight-Swift & J.B. Hunt Put Trucking Stocks in Focus

Maharathi Basu

Investors interested in the truck industry heaved a sigh of relief on Jan 17 courtesy of encouraging updates from two key players in the space — J.B. Hunt Transport Services JBHT and Knight-Swift Transportation Holdings KNX.

The respite came especially since the truck industry has struggled lately mainly due to headwinds like capacity crunch due to driver shortage. Factors such as tight labor market conditions and the Electronic Logging Devices (ELDs) have aggravated the situation. As old drivers are retiring, recruitment of new ones is becoming difficult, thanks to lack of unemployed people, the hefty nature of the job and low pay.

The dismal price performance of the Zacks Transportation - Truck  industry in a year’s time bears testimony to the challenges. The industry has shed 15.5% value in the period, making its performance worse than that of the Zacks S&P 500 composite, which has declined 5.7%.

 

Knight-Swift’s Upbeat Q4 Guidance

Shares of Knight-Swift have gained almost 12% ever since it issued a bullish guidance for fourth-quarter 2018 earnings per share on Jan 17. Detailed results will be out on Jan 29.

The gains were not limited to Knight-Swift as other players in the space like Marten Transport MRTN and Forward Air Corporation FWRD too gained following the upbeat fourth-quarter guidance.

Citing factors like improvement in revenue per loaded mile, lower fuel costs, enhanced safety and better adjusted operating ratios across its reportable units, Knight-Swift lifted its projection for fourth-quarter earnings per share. The Phoenix, AZ-based company now expects adjusted earnings between 91 cents and 93 cents (the earlier guidance had hinted at earnings in the 71-75 cents range). The Zacks Consensus Estimate is pegged at 72 cents per share.

Moreover, first-quarter earnings (on an adjusted basis) are now anticipated between 52 cents and 55 cents (the earlier guidance had hinted at earnings in the 50-54 cents range). The Zacks Consensus Estimate is pegged at 53 cents per share.

The company predicts adjusted earnings for the second quarter of 2019 between 62 cents and 66 cents.

J.B. Hunt’s Robust Q4 Also Buoys Industry

J.B. Hunt Transport Services also brought encouraging news for the trucking industry on Jan 17. Shares of this Lowell, AR- based company gained 6% on Jan 17 following its outperformance in the fourth quarter of 2018. The robust earnings report not only boosted the J.B. Hunt stock, but gave the entire industry a lift, just like Knight-Swift’s upbeat guidance.

J.B. Hunt’s results were driven by impressive performances at its key segments —Intermodal (JBI), Dedicated Contract Services (DCS), Integrated Capacity Solutions (ICS) and Truck (JBT). Revenues at the JBI, DCS, ICS and JBT segments improved 15%,25%, 7% and 21%, respectively, on a year-over-year basis leading to the company’s stellar performance in the final quarter of 2018.

Strong Freight Demand Stands Trucks in Good Stead

High freight rates as a result of an impressive shipping demand aided J.B. Hunt’s top line in the fourth quarter of 2018, which increased 16.5% year over year. In fact, robust freight demand and the resulting steep rates are major positives for the industry.

In this regard, the ongoing capacity crunch has a favorable impact. The low truck count coupled with high freight demand is pushing up already high shipping rates. In fact, the Cass Freight Shipments Index  expanded on a year-over-year basis in 11 months of 2018 (January to November). 

Truck Stocks Regain Prominence

The aforementioned twin positives have put the focus back on the trucking industry. Stock price appreciation following the updates bears testimony to the fact. In view of the renewed enthusiasm, below we have mentioned three trucking stocks which should display impressive growth despite all the challenges.

One of these stocks holds a Zacks Rank #2 (Buy). We have also mentioned two more stocks, which we believe investors should hold on to as these carry a Zacks Rank #3 (Hold).

We also take into account Growth Score, which condenses all the essential metrics from the company’s financial statements to get a true sense of the quality and sustainability of its growth. The stocks have a Growth Score of A or B.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

ArcBest Corporation ARCB, based in Fort Smith, AR, provides freight transportation services and solutions. This Zacks Rank #2 stock has seen the Zacks Consensus Estimate for 2019 earnings being revised upward to the tune of 2.9% over the past 60 days. It has a Growth Score of A.

Heartland Express HTLD   is a leader in transportation and logistics services based in North Liberty, IA. The company provides truckload transportation service to virtually every market in the east of the Rocky Mountains at any length of haul. The Zacks Consensus Estimate for fourth-quarter earnings, expected to be released on Feb 11, has increased 4.3% over the last 7 days. This Zacks Rank #3 stock has a Growth Score of B.

YRC Worldwide YRCW is the holding company for a portfolio of less-than-truckload companies. The Zacks Consensus Estimate for fourth-quarter earnings, scheduled to be released on Jan 31, has increased 72.7% over the last 60 days. This Zacks Rank #3 stock has a Growth Score of A.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

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YRC Worldwide, Inc. (YRCW) : Free Stock Analysis Report
 
Forward Air Corporation (FWRD) : Free Stock Analysis Report
 
Knight-Swift Transportation Holdings Inc. (KNX) : Free Stock Analysis Report
 
J.B. Hunt Transport Services, Inc. (JBHT) : Free Stock Analysis Report
 
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