Compared to the last year of economic pandemonium, 2021 is set to be much better all around, especially after large parts of the population get back into the swing of travel and socializing after months of lockdowns, restrictions, and overall difficulties.
Despite the rising popularity of working from home, which is considered by many as the best viable option for the foreseeable future, the general desire to get out of the house again is expected to create a boom in the second half of this year.
Where do trucking stocks fit into the equation?
Trucking stocks enjoyed a fairly prosperous 2020, with the lack of industrial demand being made up for by the surge in e-commerce and delivery services. At least in the first half of the year, the necessity for e-commerce is unlikely to lower significantly, especially in the categories of consumer goods and essential products. Combined with the probable resurgence of industrial demand, it's good news all around for truckers.
However, based on the hypothetical situation that everyone is willing to get vaccinated, widespread vaccination has been expected to take around 6 months, thus bringing changes in consumer spending habits. If consumers were to increase spending on restaurants, theaters, services, and general entertainment, the reduction in spending on goods would bring a negative impact for this group in the second half of the year.
Another important point to keep in mind is the current driver crunch. In 2020, fewer people signed up for driving school, and due to the federal Drug & Alcohol Clearinghouse's more rigorous testing rules, roughly 40,000 drivers dropped out of the workforce. In addition, due to fear of failing, some drivers may not have tried to take the test.
This hasn't been helped by the legalization of marijuana in several states. For now, it appears like many drivers exiting the pool on this basis won't return to that specific workforce. Driver scarcity equals increased driver compensation, obviously a negative impact for the stocks despite being a positive for the drivers. Nonetheless, decrease of capacity also equals higher contract prices while a larger pool of loads compete for the available trucks.
This year, there's also sizeable concern about truck manufacturers failing to reach delivery schedules due to the heavy supply chain disruptions on parts, which mainly come from the domestic market as well as from Mexico and China, caused by the pandemic.
Companies are struggling to deliver the equipment ordered earlier and earlier, meaning that assemblers are also high in demand. This market is expected to balance itself out in the second half of the year, bringing a positive effect for volumes and a negative one for truckload prices.
This year, FTR forecasts a 5% increase in trucking volumes, compared to last year's 4% decline. Dry van, specialized and reefer are all increasing by 6% compared to the 3% decline of tankers. This year, spot rates are predicted to increase 8% compared to last year's 2% increase, and contract rates will surge 10%.
Despite the mixed bag of pros and cons mentioned above, overall, it's a positive outlook for trucking stocks. If you're interested in investing in this market, some stocks to consider are:
- ArcBest Corp. ARCB with a forecasted earnings growth of 20.9%, increased revenue of 8.9%, and an earnings ESP of 0.95%.
- USA Truck, Inc. USAK is another good contender with an impressive 217.1% expected earnings growth combined with a 12.4% revenue increase.
- Marten Transport, Ltd. MRTN is another good option with expected revenue and earnings growth rates of 7.2% and 15.0% respectively.
- Likewise, Marten, P.A.M Transportation Services, Inc. PTSI is forecasted to increase earnings and revenue this year by 94.6% and 13.9% respectively.
- Lastly, Saia. Inc. SAIA is expected to boost earnings by 26.6% and revenue by 10.3% this year, combined with a good 3.1% ESP.