Skip to main content

Transportation stocks seem to fly below the radar of most investors. But right now, this is one of the better performing sectors in the market.

After getting off to a weak start in 2022, these stocks have staged a strong recovery. The Dow Jones Transportation Average (DJTA) has gained 9.3 per cent so far in the current quarter (to Aug. 26), about two percentage points better than the more closely watched Dow Jones Industrial Average. Looking back a decade, the DJTA has posted gains in eight out of 10 years. Seven of those were double-digit advances.

The index is made up of 20 companies, including railways, airlines, trucking firms, car-rental firms and delivery services.

The DJTA is closely watched by many analysts as an indicator of economic direction. The fact it is currently rising is positive news and supports the view that we may avoid a recession.

We have several transportation firms on my Internet Wealth Builder recommended list. Here are updates on two of them, both trucking companies. TFI International is a Canadian company, based in Montreal. J.D. Hunt Transport is based in Arkansas and is included in the DJTA.

TFI International Inc.

Price (Monday close): $130.90

Background: This Montreal-based company (TFII-T) is a North American leader in the transportation and logistics industry. It operates across Canada, the United States and Mexico, offering package and courier service, truckload and less-than-truckload haulage, logistics and other services.

Performance: After a big drop in mid-June, when the price fell all the way to $93.63, the shares have staged a strong recovery.

Recent developments: On Aug. 22, TFI announced that it is selling its truckload, temp control and Mexican non-asset logistics businesses to Heartland Express for US$525-million.

Walter Spracklin and James McGarragle, analysts at RBC Capital Markets, said the sale clears the way for an expected major acquisition by TFI in 2023.

“We continue to view M&A as a key catalyst for the shares” and believe the announcement increases the likelihood of a deal in the next 12 to 18 months, they wrote in a note to clients. Their target price for the company’s U.S.-listed shares was raised to US$115, from US$112.

Earlier, TFI released second-quarter results that showed significant year-over-year improvement. Revenue for the quarter came in at US$2.4-billion compared with US$1.8-billion last year. For the first six months of the 2022 fiscal year, revenue was US$4.6-billion, compared with just under $3-billion a year ago. Note that the company reports in U.S. dollars.

Adjusted net income for the quarter was US$241.1-million (US$2.61 per diluted share). That compares with $137.2-million (US$1.44) in the same period of 2021. First half adjusted income was US$398.7-million (US$4.28), compared with US$210.9-million (US$2.21) the year before.

Dividend: The stock pays a quarterly dividend of 27 US cents a share (US$1.08 a year) to yield 1.1 per cent at the current price.

Outlook: The company is generating impressive results and, with the recently announced sale, appears to be positioning itself for a major acquisition.

J.B. Hunt Transport Services Inc.

Price (Monday close): US$175.67

Background: This company (JBHT-Q) 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.

Performance: The stock hit a 52-week low of US$153.92 in mid-June but has since recovered well.

Recent developments: Like TFI, this Arkansas-based transport company is also enjoying a good year. Total operating revenue for the second quarter was US$3.84-billion, compared with US$2.91-billion the year before, an increase of almost 32 per cent. All the company’s operating units reported strong growth.

Operating income was US$353.1-million, a gain of 46 per cent from US$241.5-million last year. Net earnings were US$255.3-million (US$2.42 per diluted share), up from US$172.2-million (US$1.61) in the same quarter of 2021.

Acquisition: Earlier this year, the company announced it had purchased Zenith Freight Lines from Bassett Furniture Industries for US$87-million.

“This investment enhances J.B. Hunt’s furniture delivery capabilities by expanding our nationwide, end-to-end supply chain solution for our customers, and we look forward to establishing a long-term connection with Bassett, a manufacturer and retailer of high-quality home furnishings and a leader in the industry,” said CEO John Roberts.

Dividend: The quarterly dividend was increased by one-third in February to 40 US cents (US$1.60 a year). The shares yield 0.9 per cent at the current price.

The company is also buying back stock. In the second quarter, it purchased about 979,000 shares for a cost of US$164-million.

Outlook: Trucking companies are delivering strong profits right now.

One last note: While these companies are performing well at present, they will be vulnerable if we do slip into a recession. Be guided accordingly.

Gordon Pape is editor and publisher of the Internet Wealth Builder and Income Investor newsletters.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Report an editorial error

Report a technical issue

Editorial code of conduct

Tickers mentioned in this story

Study and track financial data on any traded entity: click to open the full quote page. Data updated as of 28/03/24 4:00pm EDT.

SymbolName% changeLast
TFII-T
Tfi International Inc
+0.05%216
JBHT-Q
J B Hunt Transport
+2.07%199.25

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe