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Truck stocks under pressure as Barclays gets more bearish on the space

Posted April 3, 2024
Jessica de Sa-Mota
The Fly

Barclays says the downcycle in truckload markets that began in early 2022 appears to be persisting this spring

Shares of J.B. Hunt (JBHT), Werner (WERN) and C.H. Robinson (CHRW) are under pressure on Monday after Barclays downgraded the first two to Equal Weight and the latter to Underweight. The firm says that weak bid season results will likely lead to volume challenges for J.B. Hunt, softer margins for Werner and growth headwinds for C.H. Robinson.


While it appears the global supply chain has entered a period of expansion following a prolonged freight recession since 2022, over-supplied North American truckload capacity is keeping rates down and profitability low for many carriers, Barclays tells investors in a research note.

Barclays understands some investors will question its SMID cap freight downgrades, especially as it appears transport demand fundamentals are improving in 2024. However, the firm says it suspects the greater challenge has been the large increase in TL capacity, as measured by the active class 8 truck fleet in the U.S. and further compounded by a surprising recent increase in new truck orders. This supply backdrop has kept contractual freight rates low in the U.S. despite some signs of recovery, especially in imported U.S. Ocean volumes and an improvement in railroad demand, which Barclays suspects could drive upside for many large cap transport equities this year. However, with contracted TL rates driving much of the sector’s ability to extract price, the firm sees TL carriers, intermodal operators and truck brokers earnings likely remaining relatively challenged from margin headwinds despite the improving demand backdrop.

Barclays further notes that the downcycle in truckload markets that began in early 2022 appears to be persisting this spring after a brief glimmer of hope in January proved to be transitory. Following some moderation in February, spot rates declined another 3% from February to March, notably below the historical average of about 1%-2% improvement, the firm notes.


Barclays downgraded J.B. Hunt and Werner Enterprises to Equal Weight from Overweight with price targets of $200 and $40, respectively, and C.H. Robinson to Underweight from Equal Weight with a price target of $65. The firm believes J.B. Hunt 2024 earnings will likely be negatively impacted by a soft bid season, driving both lower price and volume outcomes. Barclays suspects earnings could approach $6 in a downside scenario, making the consensus view for nearly $10 in EPS by 2025 begin to appear quite aggressive.

Regarding C.H. Robinson, the firm notes that its core brokerage performance has been lagging and it suspects early 2024 margin compression could be worse than expected. Given a rapid decline in Forwarding segment earnings in 2023, investors focused more on C.H. Robinson’s core TL brokerage performance. With volumes that have generally underperformed the market in recent years, as well as other more growth-oriented competitors, Barclays believes it is evident C.H. Robinson is facing increased pressure from larger and more established brokerage firms than in the past.

Meanwhile, the firm also points out that Werner’s shares have been mostly rangebound over the past four years, and it recognizes its downgrade comes not only with the stock at the lower end of that range but also likely near the cycle trough in spot rates. However, cycle inflection points have been a poor indicator of relative TL stock performance historically, keeping its analysis grounded in fundamentals and relative valuation as opposed to cycle timing.

While Barclays continues to hold the management team led by CEO Derek Leathers in high regard and appreciate ongoing efforts to drive out costs, the company can only control so much of its fate in the near-term, and the firm sees the current bid season as likely falling short of prior expectations. Further, with a larger dedicated mix than in the past, Barclays suspects it will be difficult for the company to realize similar upcycle earnings leverage as in prior periods, although not impossible given recent cost control efforts.


In morning trading, shares of J.B. Hunt have dropped about 1.5% to $196.33, while Werner’s stock has slipped almost 2% to $38.38. Also lower, shares of C.H. Robinson have slid over 3% to $73.62.

Originally Posted April 1, 2024 – Truck stocks under pressure as Barclays gets more bearish on the space

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