The Zacks Transportation – Truck industry currently stands to benefit from improving freight demand and solid investor-friendly steps.

Freight demand is steadily driving trucking volumes, which, in turn, has been boosting the trucking companies’ top lines for a while. The American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index inched up 0.2% month on month in August 2023 after rising 1.1% in July. Truck tonnage volumes are anticipated to continue improving in the near term, driven by the recovering freight demand, which has been strong. Even though economic uncertainty still prevails, the cooling inflation-related scenario is likely to have contributed to the improvement in freight demand.

Additionally, consistent shareholder-friendly initiatives in the form of dividend payouts or share buybacks imply the solid financial strength of companies in the trucking industry. Dividend-paying stocks provide a solid income stream and have fewer chances of experiencing wild price swings. These stocks are safe bets for creating wealth, as the payouts generally act as a hedge against economic uncertainty like the current scenario.

To name a few, in January 2023, J.B. Hunt Transport Services, Inc. JBHT upped its dividend by 5% to 42 cents per share. In February 2023, Knight-Swift Transportation Holdings Inc. KNX upped its dividend by 16.7% to 14 cents. In February 2023, Old Dominion Freight Line, Inc. ODFL upped its dividend by 33% to 40 cents per share.

In May 2023, Werner Enterprises, Inc. WERN announced a hike in its dividend payout. Werner’s board of directors has approved a dividend hike of 7.7%, thereby raising its quarterly cash dividend from 13 cents per share to 14 cents. Concurrent with the second quarter of 2023 results, Landstar System, Inc.’s LSTR board of directors has announced a quarterly dividend of 33 cents per share, indicating a hike of 10% from its previous dividend payout of 30 cents.

Currently, JBHT and ODFL carry a Zacks Rank #3 (Hold). LSTR is a Zacks Rank #4 (Sell) stock. KNX and WERN both carry a Zacks Rank #5 (Strong Sell).

We believe such shareholder-friendly initiatives should boost investor confidence and positively impact the bottom line. Notably, the industry has gained 26.6% so far this year, outperforming the S&P 500 Index’s northward movement of 13.7% and a 3.3% rise of the Zacks  Transportation  sector.

Despite such positives, the trucking industry continues to grapple with issues like prolonged truck driver shortages and escalating operating expenses, led by high fuel costs.

Driver shortage continues to be a major challenge facing the trucking industry. As old drivers retire, trucking companies find it difficult to hire drivers since the job does not appeal to the younger generation. The driver scarcity problem is likely to increase as freight demand further improves with the economy recovering.

Operating expenses are on the rise mainly due to increased fuel costs, hurting the bottom lines of the industry participants. Currently, oil price is hovering around $90 a barrel, representing an approximately 12% increase from the beginning of the year. As fuel expenses represent a key input cost for any transportation player, the rise in oil prices does not bode well for the bottom-line growth of trucking stocks. Further, supply-chain woes are also hurting the prospects of the stocks belonging to the trucking industry.
J.B. Hunt Transport Services, Inc. (JBHT): Free Stock Analysis Report

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

Knight-Swift Transportation Holdings Inc. (KNX): Free Stock Analysis Report

Landstar System, Inc. (LSTR): Free Stock Analysis Report

Werner Enterprises, Inc. (WERN): Free Stock Analysis Report

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