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Demand for Trucks Surges on Strong Freight Transport: 4 Picks

U.S. trucking industry has been witnessing significant demand in recent months. The trucking industry is the lifeblood of the economy as it moves more than 70% of the nation’s freight by volume. Truck transport is a “derived demand” industry, which means requirement for truckers depends on the demand for the products that trucks haul. Consequently, trucking serves as a barometer of the U.S. economy.

As the U.S. economy continues to grow, demand for carriage is also increasing and this momentum is expected to sustain in 2018. At this stage, investment in trucking stocks with favorable Zacks Rank will be a prudent move.

Robust Demand for Truckers

Trucking industry is currently benefiting from two factors. Firstly, the U.S. economy is on solid footing. In its 2017-2018 Freight Transportation Forecast, the American Trucking Association (“ATA”) has predicted that there will be persistent growth for truckers driven by manufacturing, consumer spending and international trade over the next 12 years.

Secondly, the trucking industry is currently facing capacity crunch. A healthy labor market with unemployment rate at its lowest in nearly 18 years, resulted in severe shortages of drivers. This has raised the price for truckers. On May 9, the Labor Department reported that while Producer’s Price Index increased 2.6% for the 12-month ended April, price index for truckers jumped 6%.

Latest data of DAT Analytics which keeps track of supply and demand in the freight industry, revealed that spot market load for freights were up 100% year over year in April. The flatbed load-to-truck comparison, which tracks the amount of vendors looking for flatbeds (a flat area for load carrying, which is generally high for truckers), is up 142% year over year.

Growth Inducing Policies

The two pro-growth agendas of President Trump, namely, significant cut in corporate tax and deregulation are major catalysts to the truckers. The corporate tax rate was lowered from 35% to 21%. A large part of truckers book much of their revenues in the homeland. Consequently, a significant reduction in corporate tax rate borne by truckers would be immediately accretive to cash flow.

Moreover, the Trump administration intends to spend a whopping $1.5 trillion on several infrastructure projects like constructing new roads, bridges, highways, railways and waterways across the country over a period of 10 years. This project will generate significant demand for manufacturing sector, which in turn will raise demand for freight, benefiting the truckers.

Our Top Picks

 

Landstar System Inc. (LSTR – Free Report) delivers safe, specialized transportation services to a broad range of customers utilizing a network of agents, third-party capacity owners and employees.

Landstar System has expected earnings growth of 52.8% for current year. The Zacks Consensus Estimate for the current year has improved by 11.3% over the last 60 days. The company sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank  stocks here.

Old Dominion Freight Line Inc. (ODFL – Free Report) is a leading, LTL (less-than-truckload), union-free company providing super-regional and national LTL service.

The company carries a Zacks Rank #2. Old Dominion Freight Line has expected earnings growth of 46.6% for current year. The Zacks Consensus Estimate for the current year has improved by 2.2% over the last 60 days.

Saia Inc. (SAIA – Free Report) is a leading LTL transportation company that provides a variety of trucking transportation and supply chain solutions to a broad range of industries.

The company carries a Zacks Rank #2. Saia has expected earnings growth of 71.7% for current year. The Zacks Consensus Estimate for the current year has improved by 0.3% over the last 60 days.

Marten Transport Ltd. (MRTN – Free Report) is a long-haul truckload carrier providing protective service and time- sensitive transportation in the United States.

The company carries a Zacks Rank #2. Marten Transport has expected earnings growth of 48.8% for current year. The Zacks Consensus Estimate for the current year has improved by 1.1% over the last 60 days.

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