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Trucking on a roll
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April 15, 1999: 2:09 p.m. ET
Industry takes the high road with better-than-expected earnings
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NEW YORK (CNNfn) - If the numbers are any indication, Wall Street is giving the trucking industry a big "10-4."
Over the last few days, quarterly reports from trucking companies have been running right over analysts' expectations.
Tuesday, Roadway Express Inc. (ROAD) reported a 20 percent increase in first-quarter income and J.B. Hunt Transport Services Inc. (JBHT), shifted into high gear by beating analysts' estimates on Wednesday.
On Thursday, Landstar System Inc. (LSTR), reported earnings of 71 cents per share, beating First Call's estimates of 51 cents per share; and USFreightways Corp. (USFC) joined the convoy, loading up with earnings of 65 cents per share and leaving earnings estimates of 60 cents on the side of the road.
Merrill Lynch showed its enthusiasm for the industry, raising its rating of CNF Transportation Inc. (CNF) to an "intermediate-term accumulate" from "neutral" and boosting USFreightways to a "long-term buy" from "accumulate."
CNF also got the nod from Fortune magazine, which listed the firm as the No. 1 most admired trucking company in America.
Putting the hammer down
So what's going on here, good buddy? Analysts say quite a lot, although the market may be slow to catch on.
"We've been fairly positive on the industry," said Burton Strauss Jr., an analyst with Dominick & Dominick. "The numbers for the first quarter have been better than expected. We can't see any significant obstacles that the industry can't overcome."
However, Strauss said the truck stocks have been depressed because small-cap stocks in general are not very popular. Most of the trucking companies have capitalization of under $1 billion, he said, and many are under $500 million.
"They have not been participating in this market," he said. "A number of them are selling under 10 times estimated earnings."
Still, Strauss said, unlike some companies in the Internet sector, the earnings in the trucking group are real, "nuts and bolts" kind of earnings.
Merrill Lynch analyst Jeff Kauffman, is also generally bullish on the sector, noting the positive impact of such factors as cost controls and generally good weather.
"It's kind of a play on the economy," he said. "When the economy is doing worse than expected, people sell the group. When the economy is doing better than expected, they buy the group."
Kauffman said the trucking industry could receive more good news because of inventory building due to the seemingly omnipresent Y2K situation.
"We don't think this is a breakaway rampant growth renaissance," he said. "But it is performing a bit better than we thought. I think folks are starting to pay more attention."
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