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4 Trucking Stocks That Should Deliver Good Returns

In a tough economy these names offer growth and dividends

   

Trucking companies are finally driving back from the recession that brought them to the brink. When consumer demand plummeted in late 2008 and shippers stopped shipping, the industry rapidly hit the skids. More than 1,800 truckers failed amid the carnage.

It’s hardly been a smooth road since then. As the economy began rebounding earlier this year, the industry gained momentum.  The survivors profited and truckload asset utilization rose because little excess hauling capacity was left. But as the year wore on, fears of another slowdown drove trucking stocks off a cliff in September and October.

Truckers aren’t pedal-to-the metal just yet. The American Trucking Associations’ (ATA) most recent stats gave a mixed message: Its seasonally adjusted Truck Tonnage Index inched up 1.6% in September, but the nonseasonal index (which reflects month-to-month changes in tonnage actually hauled) fell by more than 3%. That index isn’t just a trucking industry barometer but also a U.S. economic growth indicator.

Although the industry fears a downturn next year, most trucking stocks are starting to pick up speed again, with an average 25% increase in prices. Logistics consulting firm FTR Associates last week reported a three-point spike in its Trucking Conditions Index, which measures fuel prices, capacity and tonnage growth. It hit 9.2 in September, a sign that margins, prices and volumes are nearing a good range for trucking companies.

But truckers face another possible roadblock: new federal safety rules that would restrict the amount of time drivers can be on the road. The Federal Motor Carrier Safety Administration (FMCSA) hopes to reduce crash-related deaths and injuries by implementing the so-called Hours of Service rules — cutting truckers’ maximum daily driving time to 10 hours, instead of the current 11, and total daily on-duty time to 13 hours, from the current 14.

Trucking lobbyists contend the new rules would cost the industry more than $1 billion to implement. “There is little or no comprehensive, up-to-date evidence, data or science supporting FMCSA’s proposal,” the ATA said in a recent letter to Congress. Trucking companies say the new rules would make it impossible for drivers to meet existing schedules — causing delivery delays and higher costs. The FMCSA missed its Oct. 28 deadline for implementing a final rule, but it’s still working to do so as soon as possible.

That doesn’t mean all trucking stocks will be slammed when the new rules go into effect. Trucking capacity is still tight, and while freight railroads are fierce competitors, the right trucking stocks should keep on rolling through the adversity. Here are four truckers worth driving now for growth and dividends:

Con-Way (NYSE:CNW). This provider of less-than-truckload (LTL) and full truckload services has a market cap of $1.6 billion and a price-to-earnings to growth (PEG) ratio of 0.64, which means the stock is very undervalued (1.0 being fairly valued). At $23.88, CNW is trading nearly 37% above its 52-week low of $20.56 last month, and its one-year return is –18.8%. The stock has a current dividend yield of 1.4%.

J.B. Hunt (NASDAQ:JBHT). Hunt provides transport and logistics services in the U.S., Canada and Mexico, and has a market cap of $4.9 billion and a PEG ratio of about 1, meaning the stock is fairly valued. At $41.95, JBHT is trading nearly 24% above its 52-week low of $34.42 in September, and its one-year return is 14%. The stock has a current dividend yield of 1.2%.

Ryder (NYSE:R). Ryder offers truck leasing, commercial rental, logistics and transportation management worldwide. It has a market cap of $2.6 billion and a PEG ratio of nearly 1. At $51.52, R is trading more than 45% above its 52-week low of $34.28 last month. The stock’s one-year return is 16.6%, and it has a current dividend yield of 2.1%.

Knight Transportation (NYSE:KNX). The company is a short- to medium-haul carrier that focuses on commodities, dry goods and consumer products. With a market cap of about $1.2 billion, KNX has a PEG ratio of 1.14, indicating that it’s slightly overvalued. At $15.21, KNX is trading 19% above its 52-week low of $12.63 last month. The stock’s one-year return is13.9%, and its current dividend yield is a whopping 6.5%.

As of this writing, Susan J. Aluise did not hold a position in any of the stocks mentioned here.

 


Article printed from InvestorPlace Media, http://investorplace.com/2011/11/4-trucking-stocks-that-should-deliver-good-returns/.

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