Given the current turbulent market climate- and the price of oil at present- you wouldn’t think that Transportation would be a space that’s doing very well right now. However, the analysts on our Transportation roundtable this week say that this is exactly the case.
They point to the Dow Jones Transportation Index that is up “probably 9% or 10% year to date versus an S&P that has been down 14%”. Why is this the case? Analyst Todd Fowler of KeyBanc Capital Management tells us:
“In reality, the real driver of the group has been the fact that as diesel prices continued to move up during the first half of the year and as freight demand remained relatively soft, a lot of capacity was rationalized, especially in the full truckload market. So a lot of the marginal players, the small mom and pop trucking fleets that might have five or fewer trucks, either ended up filing for bankruptcy or parking their trucks because it just wasn’t profitable to drive in that environment. The amount of capacity that came out of the market helped the surviving players as there was a flight to quality, to the more financially stable carriers within the space. In addition, there was a shift of freight from the carriers that were no longer in business to the surviving trucking companies.”
For the full Transportation roundtable, including an outlook for where this space is headed and stock picks, click here.
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