Freight sector stocks, and trucking stocks in particular, are offering some interesting reads on the economy and the possibility that we’re at or near a sharp near-term peak. Specific to ArcBest (ARCB), the shares seem to be discounting a pretty significant upcoming deceleration in the business that seems out of whack with the realities of the sector.
Capacity is certainly a limiting factor across the industry, and I don’t think there’s going to be a near-term surge in capacity given the limits on driver availability. Moreover, while the economy is certainly going to decelerate as the recovery matures, further growth in e-commerce is a legitimate long-term driver, not to mention ArcBest’s own internal opportunities to gain share in trucking and its logistics operations.
I’ve been at this a long time and experience has taught me to be very cautious when cyclical companies are seeing robust current demand and the stocks look too cheap – usually that’s a sign you’re missing the coming edge of the cliff. Even pricing in at least a modest cliff’s edge here, though, I think the shares are too cheap.
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ArcBest's Valuation Suggests A Much Bleaker Freight Market Than The Companies Are Seeing
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