Chicago, IL – February 26, 2025 – Today, Zacks Equity Research discusses Old Dominion Freight Line ODFL, ArcBest Corp. ARCB and Forward Air Corp. FWRD.
The Zacks Transportation-Truck industry faces headwinds from weak freight rates, driver shortages, inflation-induced woes and lingering 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 are likely to survive the challenges are Old Dominion Freight Line, ArcBestCorp. and Forward Air Corp.
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 trucking services these companies offer includes dry-van, dedicated, refrigerated, flatbed and expedited. 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 picked up from the pandemic gloom, 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, Cass Freight Shipments Index declined 8.2% year over year in January. This measure has deteriorated year over year in each month of 2024, which confirms the overall declining trend.
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.
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.
Zacks Industry Rank Indicates Dull Prospects
The Zacks Transportation - Truck industry is a 14-stock group within the broader Zacks Transportation sector. The industry currently carries a Zacks Industry Rank #199, which places it in the bottom 20% of 248 Zacks industries.
The group’sZacks 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 2025 has decreased 41% on a year-over-year basis.
Before we present a few stocks from the industry that you may want to buy or hold on to, let’s take a look at the industry’s recent stock market performance and the valuation picture.
Truck Industry Underperforms S&P 500 and Sector
The Zacks Transportation-Truck industry has lagged the Zacks S&P 500 composite and the Transportation sector over the past year.
The industry has declined 31.7% over this period against the S&P 500's appreciation of 19.7%. The broader sector has declined 5.8% in the said time frame.
Truck 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 17.1X compared with the S&P 500’s 17.52X. It is also above the sector’s EV/EBITDA of 11.11X.
Over the past five years, the industry has traded as high as 19.57X and as low as 7.47X, with the median being 12.36X.
3 Transport Truck Stocks to Watch
Forward Air is headquartered in Greeneville, TN. This leading asset-light freight and logistics company provides services across the United States and Canada.
The company aims to grow via acquisitions. Recently, FWRD acquired Edgmon Trucking to grow its West Coast Intermodal Drayage operations.
The Zacks Consensus Estimate for 2025 earnings has been revised 8.3% upward over the past 60 days. The stock currently sports a Zacks Rank #1 (Strong Buy).
You can see the complete list of today’s Zacks #1 Rank stocks here.
ArcBest provides freight transportation services and solutions. The company is based in Fort Smith, AR. The company is being well-served by its efforts to control costs, improve productivity, and enhance service quality.
The company expects its 2025 earnings per share to increase 11.5% from 2024 actuals. ArcBest currently carries a Zacks Rank #3 (Hold).
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. The company expects its 2025 earnings per share to increase 3.7% from 2024 actuals. ODFL currently carries a Zacks Rank #3.
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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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