Oil prices are soaring amid geopolitical tensions and tight supply, extending their rally into a seventh consecutive week. Brent crude climbed 2.37% to end Friday at $93.27 per barrel, while U.S. West Texas Intermediate crude settled 2.26% higher at $92.31 per barrel. Rising crude oil prices lead to higher diesel prices, which increases costs for trucking companies.
Fuel is a shipping and freight company’s most significant expense after labor costs. Therefore, surging fuel costs are currently hampering their profits. Furthermore, the labor shortage and rising inflation are making matters worse. According to a recent Bank of America Global Research report, the crunch seen in the trucking industry is showing no signs of abating. Also, BofA found that shippers’ short-term positive outlooks have fallen, while negative outlooks have climbed, reflecting a deteriorating consensus outlook for the industry.
Given the industry headwinds, we think trucking stocks TuSimple Holdings Inc. (TSP), Werner Enterprises, Inc. (WERN), Yellow Corporation (YELL) are best avoided now.
TuSimple Holdings Inc. (TSP)
TSP in San Diego, Calif., in an autonomous technology company that develops autonomous technology designed explicitly for semi-trucks worldwide. It intends to produce a line of purpose-built (Level 4) L4 autonomous semi-trucks for the North American market.
Last week, TSP shared its plan to continue its ‘Driver Out’ program and progressively expand its scope and achieve commercial viability by initiating continuous ‘Driver Out’ paid freight operations in a significant shipping area, such as the ‘Texas Triangle’, by the end of 2023. However, the persistent supply chain issues could be a concern.
TSP’s total costs and expenses increased 52.7% year-over-year to $117.73 million in its fiscal third quarter, ended Sept. 30. Its loss from operations grew 51.5% from its year-ago value to $115.95 million. Its net loss attributable to common stockholders came in at $115.49 million, indicating an increase of 13.9% year-over-year, while net loss per share declined 68.8% year-over-year to $0.54. Its adjusted EBITDA stood at negative $81.30 million, down 21.5% from its year-ago value.
The Street expects the company’s EPS to remain negative at least until the next year.
TSP shares have declined 56% in price over the past six months and 53.8% year-to-date to close their last trading session at $16.55.
TSP’s POWR Ratings reflect its weak fundamentals. The company has an overall D rating, which translates to Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree. TSP is also rated a D in Stability and Sentiment. Within the Trucking Freight industry, it is ranked #21 of 22 stocks.
In addition to the POWR Ratings grades highlighted, one can see the TSP’s Growth, Value, Momentum, and Quality ratings here.
Werner Enterprises, Inc. (WERN)
WERN is a transportation and logistics company operating in Truckload Transportation Services and Werner Logistics. The Omaha, Neb.-based concern transports truckload shipments of general commodities in interstate and intrastate commerce worldwide.
Last month, WERN announced its partnership with Cummins Inc. (CMI), a global power solutions provider, based on which WERN will begin validating and integrating CMI’s 15-liter natural gas and 15-liter hydrogen internal combustion engines in its vehicles. However, the integration is not expected to begin until the second half of 2022.
WERN’s operating revenues increased 23.4% year-over-year to $765.22 million in its fiscal fourth quarter, ended Dec. 31. However, its adjusted operating margin decreased 10 basis points year-over-year to 13.2%. And its total operating expenses grew 23.7% from the year-ago value to $666.73 million.
The $741.36 million consensus revenue estimate for its fiscal first quarter, ended March 2022 indicates an increase of 20.3% year-over-year, while the $0.86 consensus EPS estimate indicates a 26.3% rise year-over-year.
The stock has declined 6.6% in price over the past nine months and 9% over the past month to close its last trading session at $44.04.
It is ranked #15 in the Trucking Freight industry. Click here to see the WERN’s ratings for Growth, Value, Stability, Sentiment, Momentum, and Quality.
Yellow Corporation (YELL)
Yell, through its subsidiaries, provides a range of transportation services primarily in North America. The Overland Park, Kans.-based company offers primarily less-than-truckload (LTL) shipments and supply chain solutions. The company offers various services to transport industrial, commercial, and retail goods.
YELL’s total operating expenses increased 8.9% year-over-year to $1.25 billion in its fiscal fourth quarter, ended December 31. Its comprehensive Income was $58.60 million, indicating a 159% decrease year-over-year. Its loss per share increased 137.8% from its year-ago value to $0.88. While its cash and cash equivalents balance declined 34.1% from the prior-year quarter to $314.80 million in the year ended December 31, 2021.
Analysts expect the company’s revenue to increase 11.1% year-over-year to $1.33 billion for its fiscal first quarter, ending March 31, 2022. However, its EPS is expected to remain negative for the quarter.
Over the past three months, the stock has declined 12% in price to close its last trading session at $9.82. YELL shares have slumped 22% year-to-date.
Under POWR Ratings, YELL has been accorded a D rating for Sentiment and Quality. It is ranked #20 in the Trucking Freight industry. To see additional YELL’s ratings for Growth, Value, Momentum, and Stability, click here.
TSP shares were trading at $16.60 per share on Monday afternoon, up $0.05 (+0.30%). Year-to-date, TSP has declined -53.70%, versus a -5.22% rise in the benchmark S&P 500 index during the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.
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