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.
The industry is further hampered by a shortage of drivers, which has been a continuing problem for several years. Long working hours, low pay and poor benefits have resulted in fewer people entering the industry and early retirement among veteran employees.
This has resulted in higher operating costs and unhappy customers as fewer drivers lead to delayed deliveries.
Another factor is increased competition. Big companies such as Amazon.com Inc. 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 Services Inc. and Canadian firm TFI International Inc. Here are updates on the stocks.
J.B. Hunt Transport
Ticker: JBHT-Q
Background: This company is in the freight transportation business, providing truckload, intermodal and contract carriage facilities to customers across a diverse set of industries in the United States, 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.
Performance: The share price dropped to around US$166 late last October. Then the shares changed course and have been trending higher since, although they dropped US$7.08 on Friday to finish last week at $211.70.
Recent developments: 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 US$3.3-billion, down 9 per cent from the same period the year before. For the full year, revenue was US$12.83-billion, off 13 per cent from 2022. All sectors reported revenue declines.
Earnings were also off. For the fourth quarter, the company reported a profit of US$1.47 per diluted share, a decline of 23 per cent from US$1.92 per share in the same quarter of 2022. Full-year earnings were US$6.97 per diluted share, off 24 per cent from US$9.21 the year before.
In a conference call with analysts, chief executive officer John Roberts cited rising costs for expenses such as insurance, drivers’ salaries and equipment, as well as reduced revenue, as being among the reasons for the big drop in profits.
Dividend and buybacks. The stock pays a quarterly dividend of 43 US cents (US$1.72 per year) to yield 0.8 per cent at the current price.
The company repurchased approximately 137,000 shares of common stock for US$25-million during the fourth quarter. As of Dec. 31, it had approximately US$392-million remaining under its share repurchase authorization.
Outlook: The company did not issue any outlook for 2024. One of its executives said during the conference call that the current position is “wait and see.”
Action now: The stock has moved up but there is no real news to support the market’s optimism. Investors who are considering buying should monitor the stock and begin to build a position if the share price falls below US$200.
TFI International Inc.
Ticker: TFII-T
Background: Based in St-Laurent, a suburb of Montreal, TFI is a transportation and logistics giant with a network that spans more than 80 North American cities. It has more than 90 operating companies under its banner and employs some 24,000 people.
Performance: The stock fell to below $150 late last October. However, it has recovered and hit a 52-week high last week.
Recent developments: 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 the same quarter in 2023, at just under $2-billion. But for the year, revenue was down almost 15 per cent to $7.5-billion from $8.8-billion in 2022.
Fourth-quarter net income was $131.4-million ($1.53 per diluted share). That compared to $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 to $823.2-million ($9.02 per share) in 2022.
Dividend: The stock pays a quarterly dividend of 40 cents ($1.60 a year). The shares yield 0.8 per cent at the current price.
Outlook: The company did not provide new guidance for 2024, but CEO Alain Bedard offered some words of optimism in a statement, saying: “We’re entering 2024 in an attractive position across all four business segments … Looking ahead, while continuing our sharp focus on day-to-day operations, we can also seek highly strategic investment opportunities while returning excess cash to shareholders, consistent with our board’s recently approved 14 per cent increase to our quarterly dividend.”
Action now: We do not advise new purchases at this level, but if the shares pull back to around $175, consider opening a position.
Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters.
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Gordon Pape