Shares of USA Truck, which received the most severe downgrade—from “hold” to “sell”—fell 11.2% on the Nasdaq Stock Market on Thursday. The other three, all downgraded from “buy” to “hold,” fell between 4% and 6% each. Shares in other companies in the sector, including Werner Enterprises Inc., Knight Transportation Inc., Heartland Express Inc.,Covenant Transportation Group Inc. and Celadon Group Inc., also were dragged down, with each falling from just under 2% to 5% by midday.
Stifel last week released a report targeting the entire truckload industry, writing that “pricing pressure is rampant in the generic freight market,” which includes most types of trucking services, while railroad carload pricing and freight rates among parcel carriers are on the rise.
“Many shippers have effectively elected to toss to the wayside any talk of partnerships, relationships, cooperation, collaboration, etc.,” the report read. “Shippers are under enormous pressure to cut transportation costs and seem not to be satisfied with the massive fuel surcharge reductions racked up over the past year and a half.”
John Larkin, a Stifel managing director and the report’s lead author, declined to comment.
Shares of most trucking companies have been rising since mid-January, when retailer s showed signs that they had resumed restocking after the holiday shopping season and some manufacturing measures began turning upward. But several trucking industry research groups have said capacity in the market remains relatively plentiful, giving shipping customers more leverage.
‘The pendulum has swung in the favor of the shippers, and they’re clawing back some of the rates.’
—Jason Seidl, Cowen & Co.
The downgrades wiped out the 8% year-to-date gain that USA Truck achieved in late March. Universal Truckload’s shares settled at $14.98, down 5.2% on the day, but still up about 6% since Jan. 1.
Marten, which specializes in hauling refrigerated shipments, had seen its shares rise as high as $18.72 at the end of last month, by Thursday afternoon had ventured into the red on the year, with its stock price falling 6.1% to $17.15. Hub Group, which in February hired bankers to help it identify companies it could acquire to diversify operations, is still up by more than 13% since Jan. 1, although its share price fell 4.6% on Thursday.
“It’s bid season, and the contract bids that are coming in are not looking that good,” saidJason Seidl, an analyst with Cowen & Co. who has downgraded two of the largest truckload carrier stocks, Knight and Landstar System Inc., in the last three weeks. “We’ve gotten slightly more negative on the trucking in the last month…. The pendulum has swung in the favor of the shippers, and they’re clawing back some of the rates.”