By all estimates and assumptions, 2021 is going to be a much better year for the economy than 2020 was. Large parts of the population all over the world that were forced to limit travel and socializing are going to be able to do all the things they’ve been putting off.

And even as many settle down to working from home for the long term, the desire to go out and do just that is creating pent-up demand. This is likely to create a boom in the second half of the year.

So what does all this mean for trucking stocks?

First, it’s important to remember that 2020 was a good year for this lot, because ecommerce and last-mile deliveries made up for the weakness in industrial demand. In 2021, the strength in ecommerce, especially for essentials and consumer goods, is unlikely to drop off significantly, at least in the first half of the year. At the same time, industrial demand is likely to come back pretty strongly. This strength is obviously positive for truckers.

Second, widespread vaccination of the population is expected to take 6 months or so (if everyone agrees to get vaccinated), which means there will be a change in spending patterns in the second half of the year. If people really start spending more on services, restaurants, theaters, etc, there will be a corresponding reduction in spending on goods. This is an impending negative for this group in the back half of the year.

Third, the driver crunch remains as bad as ever. Not only did fewer people sign up for driving school in pandemic-hit 2020, but a significant number (around 40,000) of existing drivers dropped out of the workforce because of the federal Drug & Alcohol Clearinghouse’s more stringent testing rules. Additionally, some drivers may not even have tried to take the test, for fear of failing it. The legalization of marijuana in a number of states hasn’t helped. It does look like many of the drivers exiting the pool on this ground won’t be coming back. The paucity of drivers has the effect of increasing driver compensation, which is of course negative. However, the resultant tightening of capacity has the effect of increasing contract prices as a larger number of loads compete for the available number of trucks.

Fourth, there’s a good amount of concern about truck manufacturers falling behind delivery schedules this year, as the pandemic induced significant supply chain disruptions on parts both domestically as well as from China and Mexico. Assemblers are also in high demand as companies struggle to deliver equipment that’s being ordered earlier and earlier. This market is likely to return to equilibrium in the second half of the year, which will be a positive for volumes and negative for prices on truckloads.

FTR forecasts a 5% increase in trucking volumes this year from a 4% decline last year, with flatbeds seeing the biggest bounce-back; dry van, reefer and specialized all increasing 6%; and tankers declining 3%. Spot rates are expected to increase 8% this year on top of the 2% increase last year, with contract rates jumping 10%.

So despite the ifs and buts mentioned above, the overall outlook for trucking stocks appears positive. Investors looking for exposure to the industry, which is placed at 69 out of 250+ Zacks-classified industries (top 27%) could consider the following stocks:

ArcBest Corp. ARCB looks good with a Zacks Rank #1, VGM Score A, expected revenue and earnings growth rate of a respective 8.9% and 20.9%, and earnings ESP of 0.95% (indicating chances of a positive surprise when it reports results).

USA Truck, Inc. USAK also looks ripe for the picking with its  Zacks #1 Rank, VGM Score A, and expected revenue and earnings growth rates of 12.4% and 217.1%, respectively. Its earnings ESP of 0.0% coupled with the buy rating is also indicative of a positive earnings surprise.

Marten Transport, Ltd. MRTN has a Zacks Rank #2 (Buy), VGM Score A, and expected revenue and earnings growth rates of 7.2% and 15.0%, respectively. Its earnings ESP of 0.0% coupled with the buy rating is also indicative of a positive earnings surprise.

Like Marten, P.A.M. Transportation Services, Inc. PTSI also has a Zacks Rank #2 (Buy) and VGM Score A. It too is expected to grow revenue and earnings this year at a rate of 13.9% and 94.6%, respectively. Its earnings ESP of 0.0% coupled with the buy rating is also indicative of a positive earnings surprise.

Saia, Inc. SAIA too has a Zacks Rank #2 (Buy) and VGM Score A. It is expected to grow revenue 10.3% and earnings 26.6% this year. And its 3.1% ESP along with the buy rating points to the possibility of a positive earnings surprise.

5 Stocks Set to Double

Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.

Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.

Today, See These 5 Potential Home Runs >>

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