Trucking industry prospects in 2018
A tax deduction for capital expenditures according to the new Tax Cuts and Jobs Act is a boon for the transportation industry. Lower taxes also help increase free cash flow. Transportation (IYT) is a cyclical industry that was reeling under pressure due to lower freight volumes in recent years.
The Dow Jones Transportation Average (DJT) closed at 11,386.73 on September 5. On a year-to-date basis, it has risen 7.3%. However, the recent rally in transportation stocks moved sideways. Rising crude oil prices are the main culprit and took a toll on transportation stocks, specifically airline companies. A decline in crude oil prices should reverse the current trend in transportation stocks.
Analysts’ estimates in 2018
For J.B. Hunt Transport Services (JBHT), analysts polled by Thomson Reuters estimate a 19.7% YoY (year-over-year) growth in 2018 revenue to $8.6 billion, from $7.2 billion in 2017. Analysts expect JBHT to report a 51.4% YoY rise in 2018 adjusted earnings to $5.42, from $3.58 in 2017. Its interest expenses are expected to rise 30% YoY in 2018.
Schneider National (SNDR) should see a 62.9% YoY growth in its 2018 adjusted earnings, according to analysts. From $0.94 in 2017, it’s expected to report adjusted EPS of $1.52 in 2018. Analysts anticipate a ~13% YoY rise in 2018 revenue to $4.9 billion, from $4.4 billion last year.
Analysts expect Knight-Swift Transportation (KNX) to report a 108.6% YoY rise in its 2018 EPS to $2.24, from $1.08 in 2017. The synergies from its merger with Knight Transportation last year should substantially boost KNX’s earnings this year.
For Landstar System (LSTR), analysts anticipate its 2018 revenue to grow 27.5% YoY to $4.6 billion, from $3.6 billion last year. Its EPS is expected to rise 61.7% YoY to $6, from $3.80 in 2017.
Werner Enterprises’ (WERN) revenue in 2018 is expected to grow 16.1% YoY to $2.5 billion, from $2.1 billion in 2017. Analysts predict EPS of $2.20 this year compared to $1.30 last year, implying a 75.1% YoY growth.
Looking at the above graph, it’s clear that analysts’ expectations are huge for Knight-Swift Transportation, followed by Werner Enterprises. Investors should keep a close eye on these two companies in the coming quarters.
In the next part, we’ll look at analysts’ recommendations for these major truckload carriers.