3 Stocks Trucking to Bigger Profits

An improving U.S. economy, substantial surge in manufactured and retail goods, and a sharp rebound in many end markets are expected to fuel the future growth of the Trucking industry.

Truck transport is a “derived demand” industry -- demand for truckers is tied to the demand for the products that trucks haul. Therefore, trucking serves as a barometer of the U.S. economy, representing 69% -70% of tonnage carried by all modes of domestic freight transportation.

Momentum to Continue

The U.S. trucking industry has been witnessing a gradual improvement in 2014. As the U.S. economy continues to grow, demand for carriage also becomes robust and the momentum is expected to sustain in the long-run. Trucks in the U.S. are responsible for the majority of freight movement over land, and form a vital part of the manufacturing, transportation and warehousing industries.

Meanwhile, American Trucking Associations (ATA), the main industry trade group, declared that its advanced seasonally adjusted SA For-Hire Truck Tonnage Index increased 1.6% in August 2014, following a gain of 1.5% in July. In August, the index equaled 132.6 (2000=100) compared with 130.5 in July. The August 2014 index was a record-high, surpassing November 2013 index of 131.0.

The SA index in August was up 4.5% year over year. Year-to-date, tonnage is up 3.1% compared with the same period of the prior year. Importantly, the equipment finance activity increased 13% year-over-year in August 2014. This is a key indicator for stronger transportation and construction demand, which bodes well for the trucking industry.

Our Picks

The ATA has expressed its confidence that the trucking tonnage will continue to grow in the second half of 2014. At this stage, we believe investors should choose stocks which carry a favorable Zacks Rank to cash on future growth opportunities. Taking these factors into account, we present three Zacks Rank #2 (Buy) stocks for investors to consider:

Con-way Inc. CNW: The company is a leading freight transportation and logistics service provider with businesses in less-than-truckload and full truckload freight services, brokerage, warehousing, supply chain management and trailer manufacturing.

For fiscal 2014, the Zacks Consensus Estimate for earnings stands at $2.37, indicating year-over-year growth of 42.64%. Notably, the Zacks Consensus Estimate for earnings increased 20 cents over the last 60 days. Con-way has also witnessed a positive average earnings surprise of 8.88% in the last four reported quarters. For fiscal 2014, the Zacks Consensus Estimate for total revenue stands at $5,804 million, up 6% year over year.

Covenant Transportation Group Inc. CVTI: The company is a truckload carrier that provides just-in-time and other premium transportation service for customers throughout the U.S. Covenant Transportation offers freight brokerage services directly as well as through freight brokerage agents, along with less-than-truckload consolidation and accounts receivable factoring services.

For fiscal 2014, the Zacks Consensus Estimate for earnings is pegged at 82 cents, reflecting year-over-year growth of a whopping 134.29%. The earnings estimate has gained 22 cents over the last 30 days. The company has also witnessed a positive average earnings surprise of 11.91% in the last four reported quarters.

Old Dominion Freight Line Inc. ODFL: Being an inter-regional and multi-regional motor carrier, the company primarily provides less-than-truckload shipments of general commodities, including consumer goods, textiles and capital goods to a diversified customer base.

For fiscal 2014, the Zacks Consensus Estimate for earnings stands at $2.96, indicating year-over-year growth of 23.64%. Meanwhile, the Zacks Consensus Estimate for earnings increased 12 cents over the last 60 days. Old Dominion has also witnessed a modest positive average earnings surprise of 1.39% in the last four reported quarters. For fiscal 2014, the Zacks Consensus Estimate for total revenue stands at $2,756 million, up 18.23% year over year.