Inside US Truckload Carriers’ Valuations after 3Q17 Earnings


Nov. 20 2020, Updated 1:44 p.m. ET

US truckload carriers’ valuations

In this final part of our US truckload carriers’ 3Q17 comparative series, we’ll focus on their valuations. Past valuation trends reflect that these carriers’ forward valuations were on the lower side. However, rising crude oil prices and increased US industrial (IYJ) output have brought momentum to their valuations. The companies we’re covering are JB Hunt Transport Services (JBHT), Landstar System (LSTR), Werner Enterprises (WERN), Ryder System (R), and Heartland Express (HTLD).

The stocks of transportation companies are cyclical in nature. They move according to the swings in the US economy. Being capital-intensive in nature, truckload carriers have high levels of depreciation and amortization. However, the degree of financial leverage varies by company.

For the purpose of valuing road carriers, we’ve considered two multiples: the forward PE (price-to-earnings) ratio and the forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) ratio.

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EV-to-forward EBITDA multiple

The EV-to-forward-EBITDA multiple represents how a road carrier is valued for every dollar of anticipated EBITDA. A lower ratio could mean an undervalued truckload company, but not always. Road carriers with a higher degree of risk may end up with low valuation multiples. The risk can be financial or operational in nature.

Landstar System (LSTR) has the highest EV-to-forward-EBITDA multiple of 14.1x. It’s followed by JB Hunt Transport Services (JBHT) with a multiple of 11.9x. Ryder System (R) has the lowest multiple of 5.4x.

Forward PE multiple

A carrier’s forward PE multiple implies the dollar amount payable today for every dollar of next year’s EPS (earnings per share). The recent past trend of US truckload companies’ forward PE multiples suggests a lower valuation for these companies.

Among the US truckload carriers we’ve covered in this series, Heartland Express (HTLD) has the highest forward PE multiple of 38.6x. It also is a zero debt company and has the highest next-one-year EPS growth projection (35%) in the peer group. Werner Enterprises (WERN) follows Heartland with a multiple of 28.4x. Wall Street analysts expect WERN’s EPS to rise 13% in the next year. Ryder has the lowest forward PE multiple of 17.2x in the peer group.

For more information on US trucking companies, be sure to visit Market Realist’s Trucking page.


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