What’s Driving Heartland America? (Part 2)
Where the rail companies are expected to get a boost from a rebounding economy, so should the trucking companies. As the U.S. starts to see some steadying of its economy, we should see an increase in products moving across America. Trucking companies are one of the key transporters of these products. The top trucking companies moving across the U.S. include: J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), Arkansas Best Corporation (NASDAQ:ABFS) and Con Way Inc (NYSE:CNW).
The overall economy also started showing signs of growth: Unemployment came in at 8.3% in July, and by the end of September had fallen to 7.8%. The Federal Reserve also recently released numbers that show members and bank presidents predicting 2.0% to 3.2% of GDP growth in 2013. The strengthening in the economy has helped lift freight volumes since mid-2009 and the trucking market is one of the top growth markets when the economy is in turnaround mode.
J.B. Hunt is one of, if not the, best-value trucking companies in the U.S. The trucker gets around 60% of its revenues from its transport services, utilizing contracts with North American rail carriers to provide intermodal freight solutions. Intermodal services provided by truckers should continue to perform well going forward, as shippers convert from rail to truck. J.B. Hunt expects upwards of double-digit intermodal volume growth over the near-term. J.B. Hunt expects to continue its robust investment plan for adding intermodal containers. The company also plans to expand into Mexico, diversifying its geographical services. One of the big draws for investors getting into J.B. Hunt is ample growth opportunities. The trucking company only has about 2% of the current market, leaving the door wide open for market expansion and penetration. The upcoming plans to invest in equipment should prove effective in capturing more market share. For 2012 the company saw 8% improvement in load count and over 2% improvement in core pricing. J.B. Hunt has also increased its initiatives to return capital to shareholders by raising its dividend payment 8.3% in 2011 and 7.7% in 2012. A step further, the company also put in place a share repurchase program of $500 million.
Old Dominion Freight Line (NASDAQ:ODFL) is another top performer in the industry, operating less-than-load carriers, as opposed to truckload carriers. This trucker is expected to see growth in core pricing for 2013 of 3% and 6.5% in volume growth. Helping spur this growth will be Old Dominion's initiatives for expansion, which included opening three service centers in 2012. Where J.B. Hunt trades relatively in line with its peers on a valuation basis, Old Dominion trades below the other major transporters at 16 times earnings and 11.5 times operating cash flow (ch (NASDAQ:CHRW)eck out all the hedge funds owning Old Dominion).
|J.B. Hunt||Arkansas Best||C.H. Robinson||Con Way Inc (NYSE:CNW)||Expeditors International of Washington (NASDAQ:EXPD)|
|Price to Earnings (next year earnings)||21||19||21||13||23|
|Price to Operating Cash Flow||14.2||3.3||22.3||5.3||24|