In this article, we discuss the 10 Best Trucking Stocks to Buy. If you want to skip the industry outlook and check out more stocks in this selection, see 5 Best Trucking Stocks to Buy.
The trucking industry is poised for a substantial upsurge, projected to handle 14.2 billion tons of cargo by 2034. The value of the worldwide freight trucking market is estimated at approximately $2.3 trillion in 2023, and is projected to expand to around $3.4 trillion by 2030.
Although trucking remains a critical component of the global economy, the industry has been facing a downturn of late. According to DAT Solutions, the average contract rate has fallen by 17 cents year-over-year to $2.47 per mile in April. Similarly, spot market rates have decreased by 6.5% since the beginning of the year. Recently, analysts from J.P. Morgan and Stephens have revised their earnings forecasts downward for several trucking companies, particularly those in the truckload sector, which is crucial to the U.S. supply chains by transporting full loads on single trucks for customers.
The COVID-19 related shutdowns caused freight costs to go through the roof. Lured by the high profit margins, several new trucking companies entered the market. This led to a surplus of capacity in the industry and consequently freight costs came tumbling down in the year 2023. This has caused a temporary downturn in the trucking market. Major trucking companies like Pride Group, Nationwide Cargo, and TBL Logistics have all declared bankruptcy due to reduced demand. However, these bankruptcies are seen as necessary adjustments by analysts. As some companies continue to go out of business, the oversupply issue will resolve leading to potentially strengthening the trucking industry by aligning capacity more closely with current demand.
Some carriers are witnessing signs of a recovery. Industry leaders, including Mark Rourke from Schneider National have expressed optimism about a return to normal conditions. According to Jason Mansur from Valley Companies, the freight rates have bottomed out last fall and have started to rise slightly in some markets, although they remain near their lowest levels. He does not expect further decreases in the future.
Move Towards Sustainability Comes at a High Cost
The Environmental Protection Agency for truck engines has set strict emissions regulations for truck engines, effective from 2027 through 2032. The move towards sustainability in the trucking industry is supposed to come at a significant financial cost. The decarbonization efforts require a heavy investment of $1 trillion. This investment will be essential to developing the necessary charging infrastructure and enhancing electrical grid networks to support the influx of electric trucks. Amid these financial apprehensions, there is a push from environmental groups for more aggressive measures to meet the United States’ obligations under the Paris Climate Agreement and to advance towards zero emissions. These groups advocate for stringent emissions standards akin to California’s Advanced Clean Trucks regulation.
Despite the current challenges faced by the industry, there are glimmers of hope on the horizon for the trucking industry. Technological innovation, including the adoption of autonomous vehicles and advanced logistics solutions, holds promise for improving efficiency and addressing labor shortages in the long term.
A delivery truck of the company driving through a suburban neighborhood, depicting the company’s commitment to providing home-heating services.
FedEx Corporation (NYSE:FDX) recently reported Q3 2024 results. The company’s CFO, Raj Subramaniam, commented on the company’s freight performance and future outlook.
The dynamics I just outlined create significant opportunities for us to improve our network utilization. Last quarter, we introduced our Tricolor strategy. Ultimately, this network design will enable us to improve the efficiency and asset utilization of the entire FedEx system; put the right product in the right network, taking advantage of our continental surface networks in Europe and our market leading FedEx Freight LTL network in the United States; and profitably penetrate new market segments at the right cost structure, including the premium airfreight market. As we move forward, we are managing the execution of Tricolor with the rigor and discipline of DRIVE and this will be a key element to our success. Moving to another area of opportunity.
In Europe, we continue to improve our service levels and focus on commercial execution. However, the B2B environment remains challenged. And in this context, we are making progress on DRIVE on track to generate $600 million of savings in fiscal year 2025 and seeking further profit optimization opportunities. As we have mentioned in previous calls, we are also experiencing a continued headwind for the United States Postal Service, which has reduced volume. Despite this volume and revenue draw down, our service obligations to the USPS remain fixed. Express and across the business, DRIVE remains a key enabler of improved profitability both in the near and the long term as we change the way we work and identify areas for structural cost reduction.[read the full earnings call transcript here]
Our Methodology
To pick out the firms for this article, we first gathered all the publicly traded firms that offer trucking services. Then, the number of hedge funds out of the 933 funds part of Insider Monkey’s database for the fourth quarter of 2023 that had invested in them was determined. The list was then ranked according to the number of hedge fund positions in each company.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, artificial intelligence technology is on the cusp of earth-shattering breakthroughs, so we identified the cheapest AI stock that is trading at less than 5 times market value excluding cash and investments with the potential to deliver 100x returns. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now, let’s take a look at the 10 best trucking stocks to buy.
10 Best Trucking Stocks to Buy
10. RXO Inc. (NYSE:RXO)
Number of Hedge Fund Holders: 21
RXO Inc. (NYSE:RXO), previously part of XPO Logistics, Inc. (NYSE:XPO), offers Full Truckload (FTL) and less-than-truckload (LTL) trucking services. The company is known for leveraging technology to provide high-value, efficient freight transportation. Their services include networked trucking operations that cater to the demands of high-volume shippers and complex supply chains.
Susquehanna analyst, Bascome Majors has increased RXO Inc. (NYSE:RXO)’s price target from $15 to $16. Despite caution regarding truckload-related transports during what’s expected to be a challenging earnings season, Susquehanna sees potential entry points emerging due to anticipated cuts.
For RXO Inc. (NYSE:RXO), hedge fund holdings increased from 19 to 21, indicating a growing interest among hedge funds in Q4 2023. Furthermore, the total value of these holdings significantly increased from approximately $666 million in Q3 2023 to about $794 million in Q4 2023.
In addition to RXO Inc. (NYSE:RXO), FedEx Corporation (NYSE:FDX), Old Dominion Freight Line (NASDAQ:ODFL), and Knight-Swift Transportation Holdings Inc. (NYSE:KNX) are part of our list of 10 best trucking stocks to buy.
9. Landstar System, Inc. (NASDAQ:LSTR)
Number of Hedge Fund Holders: 24
Landstar System, Inc. (NASDAQ:LSTR) is a unique player in the trucking industry as it operates on an asset-light model. Rather than owning a fleet, they contract with independent owner-operators to provide truckload, LTL, and expedited shipping. This model provides them with the flexibility to meet diverse transportation needs across various industries.
Wolfe Research maintained an outperform rating on Landstar System’s stock, although it has reduced its target price from 201$ to 181$. Despite improvements in freight volumes, including at ports, rail intermodal, and global airfreight, as well as a positive shift in the TL Market Demand Index, Wolfe Research foresees ongoing challenges in contractual pricing and overall yield growth. Consequently, they expect Q1 earnings reports to be mixed for the company.
Landstar System, Inc. (NASDAQ:LSTR) experienced a small increase in hedge fund holdings from 23 to 24 in Q4 2023. Alongside this, the total value of these holdings grew from $209 million in Q3 2023 to $237 million in Q4 2023.
8. ArcBest Corporation (NASDAQ:ARCB)
Number of Hedge Fund Holders: 26
ArcBest Corporation (NASDAQ:ARCB) delivers integrated logistics solutions, including a variety of trucking services. The company’s offerings include nationwide LTL services, ground expedite, and time-definite shipping. ArcBest Corporation (NASDAQ:ARCB) is recognized for its customer-centric approach and capabilities that extend beyond traditional trucking with a comprehensive suite of transportation solutions.
In Q4 2023, hedge fund holdings in ArcBest Corporation (NASDAQ:ARCB) increased from 25 to 26, signaling slight hedge fund interest growth. The total value of these holdings rose from about $99 million in Q3 2023 to $164 million in Q4 2023.
7. Saia, Inc. (NASDAQ:SAIA)
Number of Hedge Fund Holders: 31
Saia, Inc. (NASDAQ:SAIA) is a leading transportation company offering regional and national LTL shipping, along with logistics and supply chain solutions. The company operates a sizeable fleet and offers services tailored to quick, safe, and efficient freight transport, with specialized offerings like freeze protection and customer-specific solutions.
Wolfe Research has downgraded Saia, Inc. (NASDAQ:SAIA) from Outperform to Peer Perform. The decision is based on valuation considerations, as the stock has experienced significant outperformance.
Saia, Inc. (NASDAQ:SAIA) saw a slight decrease in hedge fund holdings from 32 to 31 in Q4 2023. Nonetheless, the total value of these holdings increased from roughly $637 million to $474 million.
6. J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT)
Number of Hedge Fund Holders: 35
J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) is one of the largest surface transportation and delivery service companies in North America. Its trucking services cover intermodal, dedicated contract services, integrated capacity solutions, and truckload offerings. J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) is recognized for innovative logistics and utilizing a large fleet of owned and leased trucks.
The hedge fund holdings in J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) increased noticeably from 26 to 35 in Q4 2023. The total value of these holdings rose markedly from $994 million in Q3 2023 to $1.1 billion in Q4 2023, an increase of about $188.644 million. This substantial growth in investment value suggests increasing hedge fund confidence in JBHT’s operational strength and future prospects.
Recently, J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT)’ shares dropped following the company’s Q1 report. The company posted lower than expected revenue and EPS for the quarter. a report of lower-than-expected earnings for the first quarter. This disappointing performance likely led to several analysts, including BofA Securities, UBS, and Morgan Stanley, reducing their price targets for J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT).
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Disclosure. None. 10 Best Trucking Stocks to Buy was initially published on Insider Monkey.