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Zacks Industry Outlook Highlights Old Dominion Freight Line, Marten Transport and P.A.M. Transportation Services

For Immediate Release

Chicago, IL – June 6, 2024 – Today, Zacks Equity Research discusses Old Dominion Freight Line ODFL, Marten Transport MRTN and P.A.M. Transportation Services PTSI.

Industry: Trucking

Link: https://www.zacks.com/commentary/2284007/3-truck-stocks-to-keep-an-eye-on-in-a-challenging-industry

The Zacks Transportation-Truck industry faces challenges, ranging from inflation-induced elevated interest rates, weak freight demand, truck driver shortages and supply-chain disruptions.

Despite macroeconomic challenges causing uncertainty in demand, the industry demonstrates resilience, especially for companies prioritizing growth and operational efficiency. Among the companies in the industry that will probably survive the challenges are Old Dominion Freight Line,Marten Transport and P.A.M. Transportation Services.

Industry Description

The Zacks Transportation - Truck industry houses truck operators transporting freight to diverse customers, mainly across North America. These companies provide full-truckload or less-than-truckload (LTL) services over the short, medium or long haul. The range of services these companies provide includes dry-van, dedicated, refrigerated, flatbed and expedited trucking.

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Some companies have an extensive fleet of company-owned tractors and trucks and independent contractor trucks. Besides trucking, most entities offer logistics and intermodal services as well as value-added services like container drayage, truckload brokerage, supply-chain consulting and warehousing. A few also offer asset-light services to other third-party logistics companies in the transportation sector.

3 Trends Shaping the Future of the Trucking Industry

Supply-Chain Disruptions & Weak Freight Rates: Although economic activities have picked up, supply-chain disruptions continue to dent stocks in the industry. Below-par freight rates are also hurting the industry's prospects. Highlighting the weak freight demand, the Cass Freight shipments Index declined 1.3% month on month in April. This measure has deteriorated month on month in five of the last six months, which confirms the overall declining trend.

Prolonged Truck-Driver Shortage: The persistent driver crisis in the trucking industry is worsening supply-chain challenges across the United States. Driver scarcity issues limit trucking capacity, making it difficult for trucking companies to meet increased freight demand. American Trucking Associations' chief economist, Bob Costello, expects the trucking industry to be short of more than 160,000 drivers by 2030.

Strong Financial Returns for Shareholders: With economic activities gaining pace from the pandemic lows, more and more companies are allocating their increasing cash pile by way of dividends and buybacks to pacify long-suffering shareholders. This underlines their financial strength and confidence in business. Among the players in the Trucking industry, ODFL announced an increase in the quarterly dividend this year.

Zacks Industry Rank Indicates Dull Prospects

The Zacks Transportation - Truck industry is a 15-stock group within the broader Zacks Transportation sector. The industry currently carries a Zacks Industry Rank #234, which places it in the bottom 6% of 240 plus Zacks industries.

The group's Zacks Industry Rank, the average of the Zacks Rank of all member stocks, indicates dismal near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

The industry's position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group's earnings growth potential. The industry's earnings estimate for 2024 has decreased 28.8% on a year-over-year basis.

Before we present a few stocks from the industry that you may want to hold on to, let's take a look at the industry's recent stock market performance and the valuation picture.

Industry Underperforms S&P 500 But Outperforms Sector

The Zacks Transportation-Truck industry has lagged the Zacks S&P 500 composite but surpassed the broader Transportation sector over the past year.

The industry has gained 7.1% over this period compared with the S&P 500's appreciation of 23.2% and the broader sector's uptick of 7%.

Industry's Current Valuation

Based on the trailing 12-month EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation and amortization), a commonly used multiple for valuing trucking stocks, the industry is currently trading at 12.63X compared with the S&P 500's 14.59X. It is above the sector's EV/EBITDA of 11.06X.

Over the past five years, the industry has traded as high as 15.8X and as low as 7.51X, with the median being 11.75X.

3 Transport Truck Stocks to Watch

Old Dominion is a leading LTL entity based in Thomasville, NC. Old Dominion has been benefiting from its consistent shareholder-friendly measures through dividends and share buybacks.

ODFL's liquidity position is another tailwind. Shares of ODFL have gained 12% in a year's time. ODFL currently carries a Zacks Rank #3 (Hold).

You can seethe complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Headquartered in Mondovi, WI, Marten Transport offers a network of refrigerated and dry truck-based transportation capabilities across its five distinct business platforms - Truckload, Dedicated, Intermodal, Brokerage and MRTN de Mexico.

MRTN's cost-control efforts are impressive. MRTN currently carries a Zacks Rank #3. The Zacks Consensus Estimate for 2024 earnings has been revised 4.8% upward over the past 30 days.

P.A.M. Transportation Services is a holding company that owns subsidiaries focused on providing truckload dry van carrier services, transporting general commodities throughout the continental United States, as well as in the Canadian provinces of Ontario and Quebec.

PTSI's cost-control efforts are worthy of appreciation. PTSI currently carries a Zacks Rank #3. The Zacks Consensus Estimate for 2024 earnings has remained stable at 50 cents per share over the past 30 days.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance  for information about the performance numbers displayed in this press release.

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Old Dominion Freight Line, Inc. (ODFL) : Free Stock Analysis Report

Marten Transport, Ltd. (MRTN) : Free Stock Analysis Report

P.A.M. Transportation Services, Inc. (PTSI) : Free Stock Analysis Report

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