As such, the firm initiated coverage of Knight Transportation, Ryder System and Werner Enterprises at Buy, while Old Dominion Freight Line ODFL and ArcBest Corp ARCB were started at Neutral.
- Knight Transportation: $43.
- Ryder System: $85.
- Werner Enterprises: $36.
- Old Dominion Freight Line: $105.
- ArcBest: $29.
Knight Has 16% Upside Potential
Analyst Matthew Brooklier said his $43 valuation for Knight Transportation, based on 22 times its Knight– Swift Transportation Co SWFT merger closure 2018/2019 earnings per share estimate of $1.97, implies 16-percent upside from current levels.
The analyst premised his constructive view on the stock on early indications from the truckload spot market that the cycle could be turning and that truckload capacity could be meaningfully reduced due to the Electronic Logging Device, or ELD, mandate, beginning in 2018. This, according to the analyst, could drive strong pricing as well as present volume opportunities.
"KNX's announced merger with SWFT is likely to drive incremental value creation over the longer term, particularly as best in class KNX management applies its best practices at SWFT which has operationally lagged some of its better run TL peers," the firm said.
Ryder System Could Grow Revenues Above Historical Average
Buckingham Research clarified that Ryder System has 20 percent upside potential from current levels, given the broader Truck cycle with recent signals suggesting potential for a turn.
The firm sees upside multiple secular themes driving top line growth above the company's historical average. The firm also expects the company to benefit from a stronger and more innovative sales effort and the regulation change related to the ELD mandate.See also: Total Eclipse Of The Trucking Industry: Cosmic Event Sheds Light On How Key Component Of Supply Chain Is Changing
Werner To Benefit From Secular Tailwinds, Prior Investment
The firm's price target for the company implies 17-percent upside from current levels, with the view based on the possibility of the cyclical turn in the Truckload market and ELD regulation. Additionally, the firm thinks secular tailwinds could allow the company to grow its Dedicated operations.
The firm expects the prior investment to age down the company's fleet to benefit margin and help driver retention.
Old Freight: Multiple Catalysts Vs Valuation & Expense Headwinds
Buckingham Research sees multiple catalysts for the company, likely pushing earnings higher. However, the firm thinks valuation, as well as likely additional expense headwinds in the second half of 2018, will support accelerated tonnage growth, leaving it looking for a more attractive entry point.
The firm, however, thinks Old Dominion has tremendous long-term growth prospects. The firm's current price target implies 11 percent upside from current levels.
ArcBest Core Freight Operations Stuck In Neutral
Despite a number of catalysts, which could drive earnings higher in the intermediate to long term, Buckingham Research expressed concern over the company's core Freight, or LTL, operations remaining stuck in neutral.
If several of the catalysts, the firm highlighted materialize, it said it would take a more constructive view on the stock. The firm's $29 price target suggests 12-percent upside at current levels.
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