The trucking industry was severely impacted at the beginning of the COVID-19 pandemic last winter/spring. The industry began recovering in the second half of the year, however, on the back of rising demand for the transportation of retail goods. Increased housing construction, supported near-zero interest rates, led to increased demand for the transportation of raw materials as well.
According to the report by American Trucking Associations (ATA), its Truck Tonnage Index rose 7.4% in December 2020.
An increasing rollout of coronavirus vaccines is expected to be instrumental in boosting consumer confidence, which could accelerate the resumption of trucking activity. Also, the Biden administration is expected to pass a new COVID-19 relief package soon, which should also give a significant boost to the industry in the near term.
Against this backdrop, we think it wise to bet on J.B. Hunt Transport Services, Inc. (JBHT), Knight-Swift Transportation Holdings Inc. (KNX), Landstar System, Inc. (LSTR), and Ryder System, Inc. (R). These companies are strategically positioned to gain as the anticipated economic recovery gains momentum.
J.B. Hunt Transport Services, Inc. (JBHT)
Based in Lowell, Arkansas, JBHT and its subsidiaries provide surface transportation and delivery services in the continental United States, Canada, and Mexico. The company operates primarily through five segments — Intermodal (JBI), Dedicated Contract Services (DCS), Integrated Capacity Solutions (ICS), Final Mile Services (FMS) and Truck (JBT).
Its operating revenues increased 11.7% year-over-year to $2.74 billion for the fourth quarter ended December 31, 2020. Its revenue from the DCS segment increased 2.8% year-over-year to $568.35 million, and its revenue from the ICS segment increased 56% year-over-year to $587.28 million. Also, revenue from its FMS segment increased nearly 30% year-over-year, while its revenue from its JBT segment increased nearly 50% year-over-year. Its net earnings increased 6.4% year-over-year and its EPS of $1.44 increased 6.7% year-over-year.
Analysts expect JBHT’s revenue to increase 9.4% for the quarter ending March 31, 2021, 12.3% this year and 8% next year. The company’s EPS is expected to grow 30.2% this year, 16.4% next year and at a rate of 20.7% per annum over the next five years. JBHT has an impressive earnings surprise history; it beat consensus EPS estimates in three of the trailing four quarters.
Last month, , JBHT announced a regular quarterly dividend of $0.28 per common share payable on February 19, 2021. In December, it announced enhancements to its J.B. Hunt 360° technology platform. The enhancements include the availability of temperature-controlled transportation services within Shipper 360 by JBHT. The company’s subsidiary, J.B. Hunt Transport, Inc. acquired the assets of Mass Movement, Inc. last November . Over the past three months, the stock has rallied more than 14% to close yesterday’s trading session at $146.72.
JBHT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system.
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
JBHT also has a B grade for Quality. We have also graded JBHT for Growth, Value, Momentum, Stability and Sentiment. Get all JBHT’s ratings here.
The stock is ranked #13 of 20 stocks in the A-rated Trucking Freight industry.
Knight-Swift Transportation Holdings Inc. (KNX)
Operating with a fleet of roughly 19,000 tractors and 58,000 trailers, KNX is now the industry's largest full truckload company. It operates mainly through three segments — Trucking, Logistics, and Intermodal. The company also provides rail intermodal and non-asset-based freight brokerage and logistics management services.
KNX’s top line increased 6.8% year-over-year to $1.28 billion for the fourth quarter (ended December 31, 2020). Its revenue, excluding trucking fuel surcharges, which accounted for 94.5% of total revenue, increased 11.2% year-over-year to $1.21 billion. In its trucking segment, average revenue per tractor increased 10.5% year-over-year. Its net income increased 111% year-over-year to $142.33 million, and its adjusted EPS increased 70.9% year-over-year to $0.94.
Analysts expect the company’s revenue to increase 8.5% for the quarter ending March 31, 2021, 9.8% in 2021 and 2.6% in 2022. KNX’s EPS is expected to grow 63.6% for the quarter ending March 31, 2021, 42.1% for the quarter ending June 30, 2021 and at a rate of 12.6% per annum over the next five years. KNX has an impressive earnings surprise history; it beat consensus EPS estimates in each of the trailing four quarters.
The company has announced a quarterly cash dividend of $0.08 per share of common stock payable on March 26, 2021. On February 1, KNX acquired a majority ownership position in Eleos, a Greenville, a SC based software provider. Its stock has gained 11.3% over the past year and closed yesterday’s trading session at $42.78.
KNX’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The stock has a B grade for Growth also.
In addition to the POWR Ratings grades I have just highlighted, you can see KNX’s ratings for Value, Momentum, Stability, Sentiment, and Quality here.
KNX is ranked #11 of 20 stocks in the A-rated Trucking Freight industry.
Landstar System, Inc. (LSTR)
LSTR is an asset-light provider of integrated transportation management solutions, based in Jacksonville, Florida. The company operates through the Transportation Logistics and the Insurance segment. LSTR offers services to customers across multiple transportation modes, with the ability to arrange for individual shipments of freight to provide enterprise solutions to manage customer's transportation needs.
For the fourth quarter ended December 26, 2020, LSTR’s revenue increased 30.3% year-over-year to record revenue of $1.296 billion. Revenue from total truck transportation increased 31.8% year-over-year to $1.20 billion. It reported revenue from its ocean and air cargo carriers’ segment at $43.18 million, which increased 34% year-over-year. Its net income increased more than 30% year-over-year to $65.07 million.
Analysts expect the company’s revenue to increase 21.9% for the quarter ending March 31, 2021, 47% for the quarter ending June 2021 and 13% in 2021. LSTR’s EPS is expected to grow 53.8% for the quarter ending March 31, 2021, 24.2% in 2021 and at a rate of 14.9% per annum over the next five years. Over the past year, the stock has gained 34.3%, to close yesterday’s trading session at $151.48. It is currently trading 4.7% below its 52-week high.
Last December, the company declared a special one-time cash dividend of $2.00 per share, which was paid on January 22. Regarding LSTR’s outlook, CEO Jim Gattoni said, “I anticipate demand for substitute line haul services in the 2021 first quarter will return to the still very strong levels we experienced throughout September and October, before the steep spike in demand that took place during the holiday peak season. I expect these market conditions throughout the remainder of the 2021 first quarter and, as a result, revenue and diluted earnings per share in the 2021 first quarter to be well above that of the 2020 first quarter.”
It is no surprise that LSTR has an overall rating of B, which equates to Buy in our POWR Ratings system. LSTR also has a B grade for Growth and Quality. Click here to see LSTR’s ratings for Value, Momentum, Stability and Sentiment as well.
LSTR is ranked #10 of 20 stocks in the A-rated Trucking Freight industry.
Ryder System, Inc. (R)
Founded in 1933, R provides commercial fleet management and supply chain solutions to small businesses and large enterprises worldwide. The company operates mainly through three segments — Fleet Management Solutions (FMS), Supply Chain Solutions (SCS), and Dedicated Transportation Solutions (DTS). It manages more than 272,000 vehicles. The company has one of North America’s largest fleets of trucks and an expansive infrastructure of maintenance facilities.
Ryder System is scheduled to release its fourth quarter earnings results today at 11:00 a.m. Eastern Time. For the third quarter ended September 30, 2020, R’s total revenues increased 13.5% sequentially to $2.15 billion. Its revenue from the SCS segment, which accounted for 31.8% of total revenue, increased 10.8% year-over-year to $685 million. The company reported net earnings of $35.8 million, as compared to the loss in the prior year. Its non-GAAP EPS of $1.21 surpassed a consensus estimate by 478.1%.
Analysts expect R’s revenue to increase 4.2% in 2021. Its EPS is expected to grow 140.6% for the quarter ending March 31, 2021 and 2637.5% in fiscal 2021. Over the past six months, the stock has rallied 80.4% to close yesterday’s trading session at $69.14, after hitting its 52-week high of $70.23.
The company declared a regular quarterly cash dividend of $0.56 per share of common stock on February 5 that is payable on March 19. It announced in January that its leading truck and trailer sharing platform, COOP, is expanding to three new markets — California, Tennessee, and North Carolina. Also, in January, R was named by Newsweek to its annual list of “America’s Most Responsible Companies” for 2021, representing its second consecutive appearance on the annual list. It was recognized for its ongoing commitment to corporate social responsibility (CSR) efforts.
R’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to Buy in our proprietary rating system. The stock has a B grade for Growth and Value also.
Click here to see the additional POWR Ratings for R (Momentum, Stability, Sentiment, and Quality).
R is ranked #3 of 20 stocks in the A-rated Trucking Freight industry.
The POWR Ratings are calculated by considering 118 different factors with each factor weighted to an optimal degree.
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JBHT shares were trading at $145.99 per share on Thursday morning, down $0.73 (-0.50%). Year-to-date, JBHT has gained 7.05%, versus a 4.61% rise in the benchmark S&P 500 index during the same period.
About the Author: Manisha Chatterjee
Since she was young, Manisha has had a strong interest in the stock market. She majored in Economics in college and has a passion for writing, which has led to her career as a research analyst.
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