Trucking Stocks Find Traction on Signs of a Cyclical Turnaround
Analysts see earnings for carriers like J.B. Hunt and Knight-Swift recovering from trough levels as freight capacity tightens after a multi-year downturn.
The U.S. trucking sector, battered by a multi-year freight recession, is showing signs of a long-awaited recovery, prompting renewed investor interest in major carriers. An emerging consensus among analysts suggests that industry earnings are moving past their cyclical trough, driven by tightening freight capacity and the exit of weaker players from the market.
This cautious optimism is built on a simple premise: after a prolonged period of oversupply and falling rates, the market is beginning to rebalance. Bank of America analyst Ken Hoexter has noted the industry is trying to find a "floor" after what he describes as an "elongated freight recession" that has suppressed profits. The combination of lower new truck orders and a rise in bankruptcies among smaller operators is reducing the number of available trucks on the road, setting the stage for improved pricing power for established companies.
Shares of industry leaders have reflected this shift in sentiment. J.B. Hunt Transport Services Inc. (JBHT) has been trading near its 52-week high of $190.80, closing recently at $188.57. Meanwhile, Knight-Swift Transportation Holdings Inc. (KNX), the largest truckload carrier in North America, has gained traction despite reporting a sharp 74% year-over-year decline in quarterly earnings, signaling that investors are looking past the current weakness toward a future recovery. The consensus analyst price target for Knight-Swift stands at $53.58.
The emerging recovery follows a challenging period for the industry. Freight volumes have been soft for over two years, with the American Transportation Research Institute (ATRI) identifying the state of the U.S. economy as the top industry concern for the third consecutive year. However, leading indicators now point toward a gradual improvement.
The American Trucking Associations (ATA) projects that truck volumes, after two years of declines, will grow by 1.6% in 2025. More importantly, freight rates are expected to follow suit. According to FTR Transportation Intelligence, a leading industry forecaster, contract truckload rates are anticipated to rise 2.2% in 2025, potentially accelerating to a 5% year-over-year increase by the end of the year.
"The freight market has moved into an extended correction cycle, but we are seeing the dynamics that precede a recovery," noted an analyst at ACT Research, a provider of industry data and forecasting. "Capacity is gradually tightening due to lower Class 8 truck builds and historically weak carrier profitability, which forces consolidation and discipline."
This disciplined approach is expected to benefit large, well-capitalized carriers like J.B. Hunt and Knight-Swift. Their scale, diversified service offerings, and advanced logistics platforms position them to capture market share as demand returns. J.B. Hunt, a leader in intermodal transport, is poised to benefit from any uptick in consumer and industrial goods shipments, while Knight-Swift's vast network gives it a significant competitive advantage.
Still, risks remain. The recovery's pace is heavily dependent on the trajectory of the broader economy. An unexpected slowdown in consumer spending or industrial production could delay the rebound in freight demand. However, for now, the prevailing view on Wall Street is that the trucking sector has finally put the worst of the downturn in its rearview mirror.