The trucking industry has been facing a recession for nearly four years, as freight volumes began to decrease in 2006 and persisted through the downturn of the overall market. As gas prices escalated when oil was trading at $140/barrel and transportation demand pulled back, many trucking companies were forced into bankruptcy. Even, YRC Worldwide (Nasdaq:YRCW) was on the verge of collapse in 2009.

Andy Ahern, of Ahern and Associates stated that he would be surprised if at least 2,500 trucking companies did not go bankrupt in 2010. In 2008 and 2009 5,500 and 2,200 truckers went bankrupt respectively.

IN PICTURES: 5 Investing Statements That Make You Sound Stupid

Trucking Opportunity
Despite this disappointing trend, an optimal opportunity may exist to invest in the trucking industry. Firstly, those remarks about bankruptcies were made in February when the economic outlook remained gloomy and volumes had not experienced a full rebound. the situation is slowly being reversed. In its latest quarterly report, Vitran Corporation (Nasdaq:VTNC) experienced a 293% increase in net income due to an increased number of shipments and total shipment weight. The railroads have experienced a similar trend as CSX Corporation (NYSE:CSX) reported an increase of 44% in metal shipping volumes and 63% in automotive. (Learn about the companies that aren't affected by market downturns, read 4 Characteristics Of Recession-Proof Companies.)

Railroad Correlation
A strong correlation exists between railroad shipping volumes and those associated with trucking; trains deliver goods to hubs, which are then transferred to their final destination via trucks. The Association of American Railroads recently reported that monthly freight volume is up 4.1% from 2009, but still down 14.6% compared to 2008 levels. Such data signals that there is still room for improvement in the transportation industry as industrial activity continues to resume. Trucking companies such as Con-way (NYSE:CNW) which experienced a volume surge to record levels, still have room to appreciate in value once the industry reverts to pre-recession levels.

Big Players
Most of the bankruptcies within the industry involved small private operators while the major players were able to avoid filing for Chapter 11 or Chapter 7. As a result, the larger trucking firms have been able to gain a larger customer base through asset purchases and consolidation. Furthermore, as has been observed in the railroads, the tough economic conditions forced the sector to modify their business operations to cut unnecessary costs and improve efficiency. J.B. Hunt Transportation Services (Nasdaq:JBHT) and Old Dominion Freight Line (Nasdaq:ODFL) are among the two largest transportation companies which have produced double-digit returns year to date while the overall market has remained fairly flat.

Bottom Line
The trucking industry serves a vital component of the economy, transporting consumer goods to their final selling destinations. A newly introduced government transportation regulation is indented to improve and ensure the sustainability of the industry. The FREIGHT Act of 2010 will create an official policy which aims to improve the security and efficiency of trucking. Such measures should play well for transportation investors. (Although the DJIA only includes 30 stocks, it can tell you a lot about the market as a whole. To learn more, see Why The Dow Matters.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Personal Finance

    A Day in the Life of an Equity Research Analyst

    What does an equity research analyst do on an everyday basis?
  2. Mutual Funds & ETFs

    ETF Analysis: PowerShares S&P 500 Downside Hedged

    Find out about the PowerShares S&P 500 Downside Hedged ETF, and learn detailed information about characteristics, suitability and recommendations of it.
  3. Mutual Funds & ETFs

    ETF Analysis: ProShares Large Cap Core Plus

    Learn information about the ProShares Large Cap Core Plus ETF, and explore detailed analysis of its characteristics, suitability and recommendations.
  4. Mutual Funds & ETFs

    ETF Analysis: iShares Core Growth Allocation

    Find out about the iShares Core Growth Allocation Fund, and learn detailed information about its characteristics, suitability and recommendations.
  5. Mutual Funds & ETFs

    ETF Analysis: iShares MSCI USA Minimum Volatility

    Learn about the iShares MSCI USA Minimum Volatility exchange-traded fund, which invests in low-volatility equities traded on the U.S. stock market.
  6. Stock Analysis

    Should You Follow Millionaires into This Sector?

    Millionaire investors—and those who follow them—should take another look at the current economic situation before making any more investment decisions.
  7. Professionals

    What to do During a Market Correction

    The market has what? Here's what you should consider rather than panicking.
  8. Mutual Funds & ETFs

    ETF Analysis: Vanguard Mid-Cap Value

    Take an in-depth look at the Vanguard Mid-Cap Value ETF, one of the largest and most popular mid-cap funds in the U.S. equity space.
  9. Mutual Funds & ETFs

    ETF Analysis: Schwab US Broad Market

    Take an in-depth look at the Schwab U.S. Broad Market ETF, an incredibly low-cost fund based on a wide selection of the U.S. equity market.
  10. Professionals

    Tips for Helping Clients Though Market Corrections

    When the stock market sees a steep drop, clients are bound to get anxious. Here are some tips for talking them off the ledge.
  1. Equity

    The value of an asset less the value of all liabilities on that ...
  2. Hard-To-Sell Asset

    An asset that is extremely difficult to dispose of either due ...
  3. Sucker Yield

    When an investor has essentially risked all of his capital for ...
  4. PT (Perseroan Terbatas)

    An acronym for Perseroan Terbatas, which is Limited Liability ...
  5. Ltd. (Limited)

    An abbreviation of "limited," Ltd. is a suffix that ...
  6. BHD (Berhad)

    The suffix Bhd. is an abbreviation of a Malay word "berhad," ...
  1. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  2. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  3. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  4. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  5. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>
  6. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>

You May Also Like

Trading Center

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!