These 5 Keep on Truckin’

07/20/2011 12:30 pm EST

Focus: STOCKS

Kate Stalter

CMO & Senior Financial Advisor, Better Money Decisions

These ground transportation names are showing solid chart action, and several are worth watching as they get ready to report second-quarter earnings, writes MoneyShow.com contributor Kate Stalter.

Sometimes promising stocks are overlooked because they hail from less-than-glamorous industries.

As I wrote in this column last week, consumer-discretionary names are among the market’s best performers. There are also a handful of techs, such as Polycom (PLCM), Rackspace Hosting (RAX), and Check Point Software (CHKP), which boast good price action along with healthy fundamentals.

Techs and retailers tend to grab a good amount of investor mindshare in any sort of market conditions. It would be easy to overlook some nascent strength within the old-school trucking industry.

It’s true that the Dow Jones Transportation Average hasn’t been showing the kind of strength that bulls look for to signal a new market uptrend. However, dismal performance of the airlines has been a significant factor weighing on that index. [Our technical analysis expert, Tom Aspray, has much more on the Transports’ worrisome turn here—Editor.]

Dow Transports component J.B. Hunt (JBHT) is working on its second week in a row of downside trade, but it remains above its ten-week moving average.

The Arkansas-based company reported its second-quarter earnings last week, topping Wall Street views on strength in all its business units. It cited particularly good results from what the industry calls “intermodal shipping.” In other words, transport that utilizes both truck and rail.

Its current pullback could be a bullish set-up for a new buy point above $49. Of course, general market conditions could play a big role in the direction any stock takes in the coming days and weeks. A downturn frequently drags down even better performers, so be alert for how the stock moves relative to the broader market.

A small-cap stock that’s shown recent strength is Quality Distribution (QLTY), which operates tank trucks to transport chemicals, fuel, and food products. Its market cap is just $289 million, and it trades only 114,000 shares a day. The small size means extra risk of volatility for individual investors, so extra care should be taken.

Quality is also on the low-priced side, trading between $12 and $13. Like many small caps, it’s been a fast mover, gaining more than 35% so far in 2011. It closed higher in every month between December and June.

In recent weeks, the stock pulled back after attempting a rally as the general market was also rallying. Like J.B. Hunt, Quality is getting investor support at its ten-week line.

So far, trading volume on the pullback has been light, a good sign. Its current setup is also a potentially bullish pattern, so it could bear watching.

The company is expected to report its second quarter on or around August 1, so the stock could make a move in either direction on that news. Wall Street expects earnings of 17 cents per share on revenue of $191.97 million. Those would mark increases over the year-earlier quarter.

On July 27, another trucking-industry leader, Saia (SAIA) is slated to report its second-quarter numbers. On Tuesday, the stock rallied to its best levels in almost two years, but edged slightly below its session high.

The stock has been trending higher after clearing a two-month price consolidation. Trading volume was above average as the stock surpassed its intermediate price high of $17.42. That heavier trade is a good indication that institutional investors have confidence in the stock, and are piling in.

Earnings growth bounced back last year after a loss in 2009. Wall Street expects yearly earnings of 86 cents per share, more than double 2010’s net income. Revenue growth has been trending higher in recent quarters as demand picks up.

For the second quarter, analysts expect the Georgia-based Saia to earn 27 cents per share, with revenue coming in at $264.05 million. The company trounced estimates in the most recent quarter, earning 4 cents per share while analysts had expected a loss.

|pagebreak|

While those trucking names are showing price uptrends or possibly bullish price consolidations, another to watch is trading along its ten-week averages. Forward Air (FWRD), which provides ground transportation of cargo to airports, attempted a rally earlier this month, but retreated in below-average volume.

The company reports for the second quarter after the close Wednesday, with Wall Street eyeing net income of 37 cents per share on revenue of $136.02 million.

Fundamental growth at Forward Air has been impressive, with earnings increasing at a rate of 86% or higher in each of the past five quarters. Sales, though, have been trending lower, slipping from a growth rate of 22% in the quarter ended a year ago to 12% most recently.

Finally, Old Dominion Freight Lines (ODFL) is another trucker putting on the brakes recently, but could be setting up for more gains.

The stock accelerated to an all-time high two weeks ago, rallying along with the general market. It’s since pulled back in lower volume.

Old Dominion reports its second-quarter earnings on July 28, with analysts expecting per-share net income of 55 cents on revenue of $469.17 million. The company has topped earnings views for the past four quarters—possibly a good sign of what could be ahead.

This is an industry whose fates are tied to various external factors, such as the general economy and fuel prices, so it’s possible that news-driven events could send shares suddenly lower. For now, however, several trucking names appear to be forming healthy chart patterns, and the fundamental picture continues to look strong.

Related Articles on STOCKS

Keyword Image
The Best Buys in Cybersecurity
12/08/2017 5:00 am EST

After weeks of sifting through hundreds of cybersecurity stocks on the market, I finally narrowed my...