How Analysts View Major Less-than-Truckload Carriers
Now, we’ll turn to analysts’ opinions on LTL (less-than-truckload) carriers. The LTL business is run through the hub-and-spoke model. Carriers must invest continuously in high-end technologies to stay afloat in the industry. Sentiments seem positive towards this sector. On the contrary, the truckload industry (IYJ) hasn’t seen steady improvements in the spot-rate market.
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For Old Dominion Freight Line (ODFL), 67% of analysts have recommended a “hold.” The remaining analysts have a “buy” recommendation. 33% of the analysts give a “strong buy” rating on YRC Worldwide (YRCW), 50% of the analysts have a “hold” for the stock, and no analyst has a “sell” suggestion on YRCW.
32% of analysts covering XPO Logistics (XPO) have a “strong buy” recommendation, and 58% of analysts recommend a “buy” on the stock. 91% of analysts advise a “hold” on ArcBest (ARCB). 38% of analysts recommend a “buy” on SAIA (SAIA), while the same percentage of analysts recommend a “hold.”
Analysts’ view on LTL industry
Stifel’s (SF) well-known less-than-truckload analyst, David Ross, predicts, “The expectation remains for better times ahead in LTL due to the prospect of lower taxes, reduced regulation, increased capital spending and the administration’s stated focus on domestic jobs, infrastructure, and manufacturing. In theory, these should all work to drive earnings per share higher for LTL carriers—but in practice, it may take a while.”
The Institute for Supply Management’s purchasing managers’ index rose 2.5% in August 2017 to 58.8 from 56.3 in the previous month. Out of 18 manufacturing industries tracked by ISM, 14 recorded growth in August 2017. The direction of US production has exhibited a growing trend in the last 12 months.
Many analysts believe that the rising production holds the key to LTL’s top-line growth in 2018. Plus some tightening in the truckload market could divert the lighter-weight freight towards LTL networks.
In the concluding part of this series, we’ll look at LTL carriers’ valuations.