In this article, we will discuss the 9 Best Trucking Stocks To Buy.
Trucking stocks are businesses that offer both local and long-distance freight and cargo transportation and transfer services.
According to Global Market Insights, the growing urbanization and infrastructure development are expected to fuel the global freight trucking industry, which was valued at $2.5 trillion in 2023 and is projected to grow at a compound annual growth rate of 4.2% between 2024 and 2032. The market is divided into local and long-haul groups based on distance. The local segment’s market share was approximately 55% in 2023, and by 2032, it is anticipated to surpass $1.5 trillion. The freight trucking market is divided into many segments based on trucks, including refrigerated trucks, flatbed trucks, truck trailers, and lorry tanks. In 2023, the truck trailer segment’s market share was approximately 36%. In terms of revenue share, the North American freight trucking market had a 35% position in 2023.
Connectivity is anticipated to be crucial in changing these market segments as the industry develops further. Rupert Stuetzle, general manager of EMEA manufacturing and mobility, stated,
“When we look at full logistics-as-a-service solutions, connected services could support higher-level services beyond road transport.”
According to a research report by McKinsey & Company, improvements in fleet management, driver assistance, and the adoption of zero-emission vehicles (ZEVs) could open up a profit pool of over $3 billion by 2035 because of connected, data-enabled services in commercial vehicles. For instance, fleet management systems already assist big retailers in reducing their diesel usage by up to 8%, and linked ZEVs allow for charge planning and route optimization. By 2030, it is projected that 20–25% of new vehicle sales in the US and 40% in Europe will be ZEVs. Additionally, generative AI is simplifying aftermarket services and vehicle design, with OEM-neutral solutions and new data marketplaces opening up new revenue streams. Initiatives like Eclipse SDV and COVESA are building open data standards, which will improve fleet connection and operational efficiency.
The truck sales industry is anticipated to stay stable in 2024 as a result of these standards. According to the S&P Mobility report, truck sales are likely to stay unchanged in 2024, but due to better economic conditions and the incentive to purchase before 2027 diesel-truck pollution regulations take effect, momentum is anticipated to rise toward a record-setting 2026. Through the midterm, the industry’s adoption of electric cars will be shaped by federal Greenhouse Gas Phase 3 emission regulations and California’s Advanced Clean Trucks law. As per S&P Mobility, the industry’s zero-emission vehicle (ZEV) ambitions and aspirations are at a crossroads in the next 36 months.
However, recently, the American Transportation Research Institute (ATRI) claimed that the trucking business is suffering greatly as a result of traffic congestion on US highways. According to ATRI’s Cost of Congestion research, operating expenses soared despite fewer hours of congestion, costing the U.S. trucking industry $108.8 billion in 2022—a 15% increase from 2021. This translates to $7,588 per registered truck and more than 430,000 truck drivers sitting idle for a year. Texas, California, and Florida led state costs with $9.17 billion, $8.77 billion, and $8.44 billion, respectively, accounting for 52% of overall costs. The cities with the largest urban delays were Chicago ($3.14 billion), Miami ($3.2 billion), and New York City ($6.68 billion). Fuel expenses rose by $32.1 billion due to the waste of 6.4 billion gallons of diesel.
With the holiday season around the corner, the trucking and logistics industry is experiencing strong Christmas demand, fueled by high consumer spending and e-commerce. According to the National Retail Federation, retail sales are projected to surge by 2.5% to 3.5% over 2023, with a near-record 197 million shoppers expected over Thanksgiving through Cyber Monday. In addition, According to a survey, 48% of small and medium-sized businesses anticipate more holiday sales than they did the year before. “Despite negative expectations, the U.S. consumer is still in healthy shape,” remarked Mazen Danaf, staff applied scientist and economist at Uber Freight. Despite supply chain issues and port disruptions, growth has been fueled by investments in fulfillment and route optimization, record Black Friday and Cyber Monday online sales, and faster delivery times.
With that said, here are the 9 Best Trucking Stocks To Buy.
IM_photo/Shutterstock.com
Methodology:
We sifted through stocks from Transportation ETF and from the resultant dataset, we chose 9 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 900 hedge funds in Q3 2024 to gauge hedge fund sentiment for stocks.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
9. Landstar System Inc. (NASDAQ:LSTR)
Number of Hedge Fund Investors: 27
One of the Best Freight Stocks, Landstar System, Inc. (NASDAQ:LSTR), is also one of the biggest third-party logistics companies in the fiercely competitive domestic asset-light truck brokerage market, which is worth over $120 billion. It focuses 90% of its revenue on domestic truck brokerage. Compared to asset-based truckload carriers, the company has less operating leverage because it only owns a fleet of trailers rather than tractors. As a result, it benefits from a variable cost structure with comparatively low capital intensity that, on average, produces strong capital returns of more than 30% during the previous seven years.
Furthermore, as one of the biggest suppliers, Landstar System, Inc. (NASDAQ:LSTR) has established a strong network of independent sales agents, asset-based freight carriers, and shippers that support a broad economic moat.
In the third quarter of 2024, Landstar System (NASDAQ: LSTR) has $531 million in cash and short-term investments, a cash growth of 6.95% YoY, a trailing twelve-month return on equity of 21%, and a return on invested capital of 19%, all of which demonstrate efficient capital utilization and support the company’s bull case. Moreover, in Q3 2024, truck revenue per load grew 3.2% sequentially, surpassing normal seasonality and demonstrating tenacity in a challenging freight environment.
Chuck Royce’s Royce & Associates was the largest stakeholder in the company from among the funds in Insider Monkey’s database at the end of Q3 2024. It owns 331,464 shares worth $62.60 million as of Q3.
8. RXO Inc. (NYSE:RXO)
Number of Hedge Fund Investors: 29
RXO Inc. (NYSE:RXO) is among the best freight stocks and brokered transportation platforms, which are defined by its advanced technology and nimble, asset-light business model. Its primary business is truck brokerage. It also provides three asset-light, brokered transportation services that complement its truck brokerage business: managed transportation, last mile, and freight forwarding. The business is divided into a single reportable segment. The segment mostly operates in North America and is part of the transportation market.
North America’s third-largest freight brokerage, shows significant growth with increased freight load volumes and revenue per load. RXO Inc. (NYSE:RXO)’s revenue increased by 7% year on year in Q3 2024, driven by the Coyote Logistics acquisition in September 2024 and solid performance in Managed Transportation and Last Mile services, including an 11% YoY increase in Last Mile stops. Its top-line growth was significantly boosted by these factors.
RXO Inc. (NYSE:RXO) ‘s acquisition of UPS’ freight brokerage business broadens its market reach, customer base, and potential for economies of scale. Despite pricing pressures, the company’s growing volumes and margins and reviving freight market suggest strong future growth potential.
After the Coyote transaction was closed, Goldman Sachs provided a price target of $29 for RXO Inc. (NYSE:RXO). According to the company, RXO’s valuation and a share price that has already increased by roughly 9% this year have helped to limit its short-term relative optimism in the shares. Following its acquisition of Coyote, Goldman also sees room for development, positioning RXO as the third-largest freight brokerage.
7. Knight-Swift Transportation Holdings Inc. (NYSE:KNX)
Number of Hedge Fund Investors: 30
One of the Best Freight Stocks, Knight-Swift Transportation Holdings Inc. (NYSE:KNX), is the largest truckload carrier in the United States, delivering a wide range of transportation services. According to the company’s asset-based trucking business, approximately 82% of revenue comes from the U.S. Xpress deal pro forma. Full truckload (for-hire dry van, refrigerated, and dedicated contract) accounts for 69% of revenue, while less than truckload accounts for 13%. Intermodal accounts for around 6% of revenue, while truck brokerage and other asset-light logistics services account for 9%. The firm’s intermodal operations comprise drayage (regional trucking services to and from inland intermodal ramps/terminals) and the underlying movement of its shipping containers on Class I railroads. Services provided to shippers and third-party truckers, such as equipment leasing and maintenance, make up the remaining revenue.
Knight-Swift Transportation Holdings Inc. (NYSE:KNX)’s bull case is its rising less-than-truckload (LTL) business, which had a 16.7% revenue increase yearly in Q3 of 2024, due to network development with 16 new locations and the DHE purchase. Improvements in the operating ratio also indicate operational efficiency, and the logistics segment’s increased revenue per load by 13.6% YoY shows pricing power. Additionally, in Q3 of 2024, the operating cash increased by 41.46% yearly.
Knight-Swift Transportation Holdings Inc. (NYSE:KNX) price objective was increased from $62 to $68. According to the company, significantly higher less-than-truckload multiples indicate that the market is excited about opportunities beyond the current slowdown. In a research note, the analyst informs investors that Barclays’ updated upcycle analysis implies considerable profit growth potential through 2026. The company argues that an upcycle study reveals the group has a lot of volume potential, which is strengthened by share increases in addition to demand recovery.
Dmitry Balyasny’s Balyasny Asset Management was the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 3.75 million shares worth $202.11 million as of Q3.
6. Saia Inc. (NASDAQ:SAIA)
Number of Hedge Fund Holders: 32
Saia, Inc. (NASDAQ:SAIA) is one of the largest less-than-truckload carriers in the United States, with more than 200 sites and a fleet of over 6,200 tractors and 20,800 trailers. As a national LTL carrier, the company provides time-definite and expedited services for packages weighing between 100 and 10,000 pounds. It is one of the best providers in terms of profitability.
Saia, Inc. (NASDAQ:SAIA)’s revenue for the third quarter of 2024 was $842.1 million, an 8.6% year-over-year growth, making it one of the Best Freight Stocks. Strong operational momentum was evident in the 8.5% growth in LTL shipments and the 7.7% growth in tonnage per workday overall. Furthermore, LTL revenue per hundredweight and per shipment, excluding fuel surcharges, rose by 1.7% and 0.9% YoY, respectively. Additionally, operating cash flow increased 45.54% year over year.
In honor of its 100th anniversary, the company announced on December 18, 2024, that it will be partnering with Tesla to launch electric semi-trucks, showcasing its commitment to sustainability and innovation. The trucks’ remarkable effectiveness and performance established Saia, Inc. (NASDAQ:SAIA) as a pioneer in sustainable logistics.
Brian Ossenbeck, an analyst at JPMorgan, increased the firm’s price objective for Saia, Inc. (NASDAQ:SAIA) from $499 to $566. The firm claims that less-than-truckload equities “have rapidly re-rated once again” in response to the election results and the perception that the freight recession is ending.” The analyst informs investors in a research note that sentiment in the sub-sector is still favorable and that JPMorgan considers less-than-truckload to be the most preferred category in transport, with positioning continuing to move away from U.S. railroads. Models were modified to better represent November’s operating performance.
Israel Englander’s Millennium Management was the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 210,359 shares worth $91.98 million as of Q3.
5. Old Dominion Freight Line (NASDAQ:ODFL)
Number of Hedge Fund Investors: 38
The second biggest less-than-truckload carrier in the US, Old Dominion Freight Line (NASDAQ:ODFL) has over 11,000 tractors and more than 250 service stations. Its profitability and capital returns are far higher than those of its competitors, and it is among the trucking industry’s most efficient and disciplined providers. The major goals of strategic efforts are to increase network density by gaining market share and to sustain industry-leading service (including ultralow cargo claims) by making consistent infrastructure investments.
Old Dominion Freight Line (NASDAQ:ODFL) is in a strong position to gain market share as former Yellow freight is moved around in the upcoming year because of its capacity investment, placing it among the Best Freight Stocks.
In November 2024, the company’s LTL revenue per hundredweight climbed 3.7% year on year, demonstrating solid yield management despite the economic downturn. Long-term growth in market share and increased shareholder value are made possible by the business’s commitment to providing exceptional customer service. Moreover, in Q3 of 2024, the operating cash flow grew by 4.02% YoY.
Eric Morgan, an analyst at Barclays, increased his price objective for Old Dominion Freight Line (NASDAQ:ODFL) from $190 to $220. Market confidence for possibilities beyond the current downturn is reflected in considerably higher less-than-truckload multiples, according to the firm. In a research note, the analyst informs investors that Barclays’ updated upcycle analysis implies considerable profit growth potential through 2026. According to the firm, an upcycle study indicates that the group has plenty of volume potential, which is supported by share increases on top of a recovery in demand.
Henry Ellenbogen’s Durable Capital Partners was the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 1.2 million shares worth $238.99 million as of Q3.
4. J.B. Hunt Transport Services Inc. (NASDAQ:JBHT)
Number of Hedge Fund Investors: 39
In terms of revenue, J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) is one of the leading surface transportation firms in North America. Its main business segments are asset-light truck brokerage (11%), for-hire truckload (6%), heavy goods final-mile delivery (7%), dedicated trucking services that cater to customer-specific fleet needs (28%), and intermodal delivery, which uses Class I rail carriers for the underlying line-haul movement of its owned containers (48% of sales in 2023).
Positive long-term trends for intermodal shipping include shippers’ attempts to reduce transportation costs by converting modes (truck to rail) and secular restraints on the increase of truckload capacity.
One of the Best Freight Stocks, J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT)’s intermodal volume rose 5% year over year in Q3 2024, with eastern network loads rising 3% and transcontinental network loads climbing 7%. The company’s Truckload segment’s operating income rose 6% to $8.2 million, mostly as a result of better network balance and cheaper trailing capacity expenses.
Citi analyst Ariel Rosa maintained a Buy rating on J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) and increased the price objective from $204 to $227. Despite mixed Q3 financial reports and generally cautious Q4 outlooks, the business claims that confidence in North American transports has “rapidly improved.” Investors are “chasing stocks that have already risen considerably, with companies having to significantly outperform estimates to justify current valuations,” according to Citi officials. On the other hand, there is a growing chance that 2025 earnings will fall short.
Paul Marshall And Ian Wace’s Marshall Wace LLP was the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 524,991 shares worth $90.47 million as of Q3.
Parnassus Mid Cap Fund stated the following regarding J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) in its Q3 2024 investor letter:
“We welcomed J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) to the portfolio during the quarter. The largest intermodal transportation provider in the country, J.B. Hunt is well positioned to benefit when freight volumes improve. J.B. Hunt is the largest provider of intermodal trucking services in the country. Freight volumes have been in an extended downturn, and we believe that freight volumes are poised to inflect higher and that J.B Hunt’s margins should recover sharply.”
3. United Parcel Service Inc. (NYSE:UPS)
Number of Hedge Fund Investors: 43
As the biggest package delivery company in the world and one of the Best Freight Stocks, United Parcel Service, Inc. (NYSE:UPS) operates a huge fleet of over 500 aircraft, 100,000 vehicles, and hundreds of sorting facilities to deliver an average of over 22 million products daily to homes and businesses globally. About 64% of the company’s overall revenue comes from domestic US package operations, with overseas packages accounting for 20%. The rest consists of contract logistics, truckload brokerage, and air and ocean freight forwarding. The business is presently looking at “strategic alternatives” for Coyote, the truck brokerage business it purchased in 2015.
United Parcel Service, Inc. (NYSE:UPS) reported $22.2 billion in revenue for the third quarter of 2024, a 5.6% YoY increase. The U.S. Domestic Segment increased by 5.8% year on year, driven by a 6.5% increase in average daily volume. The International Segment rose by 3.4% year on year to $4.41 billion, while Supply Chain Solutions climbed by 8.0% year on year to $3.38 billion, primarily due to growth in air and ocean forwarding and USPS air cargo onboarding.
Oppenheimer maintained an Outperform rating on United Parcel Service, Inc. (NYSE:UPS) shares and increased the price target from $140 to $146. The company reported that its adjusted EPS for the third quarter of $1.76 exceeded both its expectation and the consensus of $1.60 and $1.63, respectively. According to Oppenheimer, UPS is now projecting $91.0 billion in consolidated sales and a 9.6% adjusted operating margin in 2024.
Ken Griffin’s Citadel Investment Group was the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 3.4 million shares worth $469.17 million as of Q3.
2. XPO Logistics Inc. (NYSE:XPO)
Number of Hedge Fund Investors: 48
One of the Best Freight Stocks, XPO, Inc. (NYSE:XPO), is a top provider of freight transportation services based in Greenwich, Connecticut. The business is getting closer to being a less-than-truckload carrier that relies solely on assets. The company’s two primary business segments are European Transportation and North American Less-Than-Truckload (LTL). It operates on a global scale. A diverse range of industries are served by the company, including manufacturing, food & beverage, retail, e-commerce, and consumer products.
XPO Logistics, Inc. (NYSE:XPO)’s Q3 of 2024 revenue of $2.05 billion, up 3.7% from Q3 2023’s $1.98 billion, was fueled by increased yields in North American LTL and higher volumes in European transportation. The North American LTL segment’s revenue increased 1.9% to $1.25 billion, while its yield increased 6.7% (fuel excluded). Higher volumes enabled the European Transportation segment’s revenue to rise by 6.8% to $803 million. Moreover, operating cash flow grew by 13.30% year over year.
The price objective for XPO Logistics, Inc. (NYSE:XPO) was increased by JPMorgan from $146 to $160. The company claims that less-than-truckload equities “have rapidly re-rated once again” in response to the election results and the perception that the freight recession is ending. The analyst informs investors in a research note that sentiment in the sub-sector is still favorable and that JPMorgan considers less-than-truckload to be the most preferred category in transport, with positioning continuing to move away from U.S. railroads. It modified the models to better represent the operating performance in November.
Farhad Nanji And Michael Demichele’s MFN Partners was the largest stakeholder in the firm from among the funds in Insider Monkey’s database. It owns 11.43 million shares worth $1.23 billion as of Q3.
ClearBridge Large Cap Value Strategy stated the following regarding XPO, Inc. (NYSE:XPO) in its Q3 2024 investor letter:
“Among transports, we maintained our preference for less than truckload (LTL) provider XPO, Inc. (NYSE:XPO), to which we added during the period. We funded the XPO addition first by trimming and ultimately exiting United Parcel Service. UPS’s undemanding valuation notwithstanding, we think a healthier industry structure and better pricing dynamics make XPO a better longer-term investment.”
1. FedEx Corporation (NYSE:FDX)
Number of Hedge Fund Investors: 55
FedEx Corporation (NYSE:FDX) is still the largest distributor of expedited packages worldwide and the best Best Freight Stocks, having pioneered overnight service in 1973. The firm made 47% of its income from its express division, 37% from ground, and 10% from freight, its asset-based less-than-truckload shipping segment, in the fiscal year 2024, which concluded in May. The remainder comes from other services, such as FedEx Office, which produces and ships documents, and FedEx Logistics, which provides global forwarding. In 2016, the company expanded its European footprint by acquiring the Dutch transportation company TNT Express.
As the biggest less-than-truckload carrier in the US, FedEx Corporation (NYSE:FDX) aids in building strong bonds with both industrial and retail shippers on the package side. The business has steadily improved its ground positioning over the past ten years, supported by capacity investment and a minor speed advantage over UPS.
Despite a difficult demand environment, FedEx Corporation (NYSE:FDX)’s transformation initiatives, such as the DRIVE program, have resulted in cost reductions of $2.2 billion, increasing adjusted diluted EPS to $4.05 in Q2 FY2025. The company’s outstanding shareholder returns and operational efficiency are highlighted by the $1 billion in share purchases it made during the quarter and its projected full-year adjusted diluted EPS of $19.00–$20.00.
The price objective for FedEx Corporation (NYSE:FDX) was increased by BMO Capital from $300 to $330 following its Q2 results. The analyst tells investors in a research note that although FedEx’s guidance was lowered due to ongoing demand and macro headwinds, the package segment’s underlying performance continues to show progress on the front of structural cost reduction, positioning FedEx to leverage an eventual demand recovery. BMO commented that FedEx’s decision to move forward with a complete separation of the LTL business is a welcome holiday gift to shareholders and has the potential to unlock immense value.
Michael Larson’s Bill & Melinda Gates Foundation Trust was the largest stakeholder in the company from among the funds in Insider Monkey’s database. It owns 2.53 million shares worth $693.60 million as of Q3.
Sound Shore Management stated the following regarding FedEx Corporation (NYSE:FDX) in its Q3 2024 investor letter:
“Meanwhile, detractors of note for the quarter were connected by a common theme: signs of a slowing economy. NXP Semiconductors, a leading chip maker for the auto industry, was lower on uncertain auto demand and package hauler FedEx Corporation (NYSE:FDX) lagged on muted volume trends. Importantly, both of these companies have ways to increase earnings outside of the business cycle, but are not entirely immune to the recent slowdown. Business cyclicality requires investor patience and a long-term perspective – we have both.”
Overall, FedEx Corporation (NYSE:FDX) ranks first on our list of the 9 Best Trucking Stocks To Buy. While we acknowledge the potential for FDX to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than FDX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. 9 Best Trucking Stocks To Buy is originally published on Insider Monkey. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
