Analyst downgrades trucking stocks, cites LTL weakness

Baird analyst Jon Langenfeld wrote in a note to clients that this year’s pre-holiday ramp-up will be even weaker than last year. He said that while weakness is widely expected among investors, Wall Street’s earnings predictions for the second half of 2008 and the first half of 2009 “still appear overly optimistic.”

The Associated Press

9/22/2008

NEW YORK — Shares of trucking companies fell Monday, as the broader market stumbled and two analysts suggested that the sector’s stocks will be weighed down by weakness in near-term demand.

“Following a solid end to the second quarter, domestic freight trends have weakened throughout the third quarter as the 2008 peak season has failed to materialize,” Baird analyst Jon Langenfeld wrote in a note to clients.

The analyst predicts that this year’s pre-holiday ramp-up will be even weaker than last year. He said that while weakness is widely expected among investors, Wall Street’s earnings predictions for the second half of 2008 and the first half of 2009 “still appear overly optimistic.”

Less-than-truckload carriers will also be hurt by deteriorating pricing, the analyst said. Langenfeld added that some LTL carriers are actually being hurt by falling fuel surcharges.

Slipping fuel prices should be a driver for truckload carriers earnings in the third quarter though, he said.

The analyst expects cheaper fuel will offset weak demand and allow some truckload carriers to beat projections.

Also Monday, JPMorgan analyst Thomas R. Wadewitz downgraded shares of several LTL carriers, highlighting an expected weakening of demand and increased pricing competition.

Truckload carriers generally dedicate an entire trailer to one customer and move the freight directly from the shipper to the receiver. Less-than-truckload carriers fill their trucks with freight from a variety of sources and might re-sort and redistribute it at a company terminal along their route.

In midday trading, LTL carrier YRC Worldwide Inc. fell 98 cents, or 6.2 percent, to $14.84 and Arkansas Best Corp. fell $2.03, or 5.1 percent, to $37.99.

Truckload carrier Knight Transportation Inc. lost 45 cents, or 2.3 percent, to $19.03, while Werner Enterprises Inc. gave up 47 cents to $26.