US trucking companies directly compete with railroads, especially on the intermodal front. While railroads bore the pain of weak freight volumes in 2016, trucking companies were better off. Low fuel prices during 2016 provided the main reason for consolidated truck carriers’ competitive advantage, even in the long-haul lanes.
On the service front, these carriers were quick to respond and were primarily responsible for paring away railroads’ intermodal business market share. However, the rise in fuel prices and excess truck capacity could complicate matters for trucking companies going forward.
The truckload market should feel the impact more than the LTL (less than truckload) market. The first sign of this was the merger of two truckload carriers, Swift Transportation (SWFT) and Knight Transportation (KNX) earlier this year.
Trucking companies’ stock performance
Commodity prices have a great bearing on truck carriers’ performance, and they have risen since the beginning of 2017. Trucking companies’ fuel surcharge revenues are directly tied to fuel prices. With the momentum in fuel prices, surcharge revenues are expected to pick up.
The stock market performance for the major truckload and LTL carriers in last one-year period ended June 28, 2017, are below:
- B. Hunt Transport Services (JBHT): 16.8%
- Swift Transportation (SWFT): 82.4%
- Knight Transportation (KNX): 48.3%
- Landstar System (LSTR): 28.9%
- Werner Enterprises (WERN): 34.9%
- Old Dominion Freight Line (ODFL): 65.8%
- YRC Worldwide (YRCW): 28.9%
- SAIA (SAIA): 111.7%
Investors interested in exposure to major industrial companies can consider the iShares US Industrials ETF (IYJ). This ETF has ~11% exposure to major US rail carriers and airlines.
In the final part of this series, we’ll see what Wall Street analysts have to say about major trucking stocks.