When looking at any transportation industry stock, the price of oil is one of the most important things to consider. The good news is that after the wild pricing frenzy fueled by Middle East protests and speculation, a hint of reason is returning to oil prices and they’ve slipped back under $110/barrel.
Gas prices are spiking at or nearly $4 a gallon as they always do heading into the summer travel season, but major trucking companies are doing what they need to do to roll with that higher cost of doing business. And what they need to do is pass those costs on to their customers – through fuel surcharges.
This works for trucking companies because of supply and demand. Those 1,800+ trucking companies that shuttered their doors during the recession took a lot of trucks and drivers off the road, and that shipping capacity has not been replaced. Recent estimates show that truckload capacity has shrunk to near historic levels — as much as 97% of that capacity is being used today.
Shippers needing to ship more goods as the economy improves are at the mercy of the market. And that means trucking companies can pass on higher gas prices in the form of fuel surcharges. Shippers are grumbling, of course, but for domestic shipments that can’t move by rail, there are few alternatives.
Here are 5 trucking stocks that deserve a closer look:
JB Hunt (Nasdaq:JBHT). Investors fell back in love with JB Hunt last week. The company’s first-quarter earnings were up 34% compared to this time last year. The biggest news: fuel surcharges alone brought in a whopping $169 million ($61 million more than a year earlier). That more than offset higher fuel costs of $109 million.
Old Dominion Freight Line (Nasdaq:ODFL). Old Dominion has been a point of light among trucking stocks. The company has strong fundamentals, including a little more excess capacity than some of its competitors — such as the struggling YRC Worldwide (Nasdaq:YRCW). Old Dominion has risen by nearly 15% since Feb. 3.
Werner Enterprises (Nasdaq:WERN). Carriers like Werner are well-positioned to reap rewards as a result of tight capacity if the economy continues to improve. Werner shares have risen 8% since Feb. 3.
Con-Way (NYSE:CNW). Strong fundamentals and healthy growth prospects make this carrier one that may be underpriced relative to its potential. Con-Way has risen nearly 14% since Feb. 2.
Landstar (NASDAQ:LSTR). Analysts expect Landstar to report strong quarterly earnings on Thursday. The stock has risen 14% since Feb. 2.
As of this writing, Susan J. Aluise did not hold a position in any of the stocks mentioned here.