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The trucking industry is going through some tough times. Many companies reported a decline in revenue and profits in 2023 as lower volumes and soaring costs took their toll. Inflation has pushed up the cost of wages, fuel, equipment, insurance, and new vehicles at a time when sales have dropped. So what’s on the road ahead for truckers?
The route isn’t clear by any means. The industry is further hampered by a shortage of drivers, which has been an ongoing problem for several years. Long working hours, low pay, and poor benefits have resulted in fewer people entering the industry and early retirement among older employees. This has led to higher operating costs and unhappy customers as fewer drivers leads to delayed deliveries.
Another factor is increased competition. Big companies like Amazon.com have created their own delivery fleets, and with the growth in e-commerce, some smaller firms are doing the same.
The result is a profit squeeze for truckers. We saw this in the annual reports from the two large trucking firms we track in my Internet Wealth Builder newsletter, U.S.-based J.B. Hunt Transport and Canadian firm TFI International. Here are updates on the stocks.
J.B. Hunt Transport Services Inc. (NSD: JBHT) is in the freight transportation business, providing truckload, intermodal, and contract carriage facilities to customers across a diverse set of industries in the U.S., Canada, and Mexico. It specializes in handling imports through its “shore to door” service. Major customers include the Burlington Northern and Norfolk Southern railways. J.B. Hunt is a Fortune 500 company, an S&P 500 company, and a component of the Dow Jones Transportation Average. The company is based in Arkansas.
The share price dropped to the $166 range in late October. Then the shares changed course and have been trending higher since, trading recently at $197.00. The stock pays a quarterly dividend of $0.43 ($1.72 per year) to yield 0.8% at the current price.
Fourth-quarter and year-end results showed that the company’s warnings about a slowdown in business were on target. Revenue for the quarter was $3.3 billion, down 9% from the same period the year before. For the full year, revenue was $12.83 billion, off 13% from 2022. All sectors reported revenue declines.
Earnings were also off. For the fourth quarter, the company reported a profit of $1.47 per diluted share, a decline of 23% from $1.92 per share in the same quarter of 2022. Full year earnings were $6.97 per diluted share, off 24% from $9.21 the year before.
The company repurchased approximately137,000 shares of common stock for $25 million during the quarter. As of Dec. 31, it had approximately $392 million remaining under its share repurchase authorization.
In a conference call with analysts, CEO John Roberts cited rising costs for such expenses as insurance, drivers’ salaries, and equipment, as well as reduced revenue, as being among the reasons for the big drop in profits.
The stock has moved up, but there is no real news to support the market’s optimism. Internet Wealth Builder advises those considering buying to monitor the stock and begin to build a position at a share price below US$200.
TFI International Inc. (TSX: TFII) is a Canadian company, based in St. Laurent, a suburb of Montreal. It is a transportation and logistics giant, whose network spans more than 80 North American cities. It has more than 90 operating companies under its banner and employs some 24,000 people.
The stock fell to below $150 in late October. However, it has recovered and hit a 52-week high last month. It pays a quarterly dividend of $0.40 ($1.60 a year). The shares yield 0.8% at the current price.
Fourth-quarter and year-end results were similar to those of J.B. Hunt, with both showing weakness in revenue and profits in the face of inflation headwinds and reduced volume.
TFI reported fourth-quarter revenue that was flat with last year, at just under $2 billion. But for fiscal 2023, revenue was down almost 15% to $7.5 billion from $8.8 billion in fiscal 2022. Fourth-quarter net income was $131.4 million ($1.53 per diluted share). That compared with $153.5 million ($1.74 a share) in the prior year. For the 12-month period, earnings were $504.9 million ($5.80 a share), compared with $823.2 million ($9.02 per share) in 2022.
The Internet Wealth Builder does not advise new purchases at this level but if the shares pull back to the $175 range, consider opening a position.
Gordon Pape is one of Canada’s best-known personal finance commentators and investment experts. He is the publisher of The Internet Wealth Builder and The Income Investor newsletters, which are available through the Building Wealth website.
Follow Gordon Pape on X at X.com/GPUpdates and on Facebook at www.facebook.com/GordonPapeMoney.
Notes and Disclaimer
Content © 2024 by Gordon Pape Enterprises. All rights reserved. Reprinted with permission. The foregoing is for general information purposes only and is the opinion of the writer. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting, or tax advice. Always seek advice from your own financial advisor before making investment decisions.
Image: iStock.com/Aziz Shamuratov
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