We recently compiled a list of the 9 Best Trucking Stocks To Buy. In this article, we are going to take a look at where Knight-Swift Transportation Holdings Inc. (NYSE:KNX) stands against the other best trucking stocks.
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.
A truckload carrier negotiating a challenging terrain, reflecting the company’s expertise in short-to-medium haul truckload.
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)
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.
Overall, KNX ranks 7th on our list of the best trucking stocks. While we acknowledge the potential for KNX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than KNX 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. This article is originally published at Insider Monkey.
