Truckload carrier US Xpress Enterprises Inc. said it would likely post a loss in the first quarter, which compares with a profit last year, citing lower-than-expected freight demand, severe winter weather and rising fuel prices. The news was not entirely unexpected, as the company usually experiences a rough start to the year and carriers throughout the sector have complained of similar headwinds.
The sector also witnessed a downgrade of J.B. Hunt Transport Services Inc. by Edward Wolfe at Bear Stearns, who took the stock to "Peer Perform" from "Outperform," due mostly to the 37 percent it has gained since the start of the year.
Dow theory relies on confirmation of a move by at least two averages. The theory is simple. If business is really doing well, then they will have to ship their goods to market. This in turn is good for transportation companies.
However, the above news is not good for transportation companies. We'll have to see how this news plays out in the big scheme, but for now consider it food for thought.
1 comment:
What severe winter weather? That trope just won't fly. This winter's weather wasn't any worse than any other, right across the nation. It might have happened during periods when most people would not have expected it, but that doesn't make it worse.
Rising oil prices crippling effect on over the highway truckers is to be expected. Most of those guys run on margins which compete with supermarkets'. Having diesel prices jump by a third when prices are level or being driven lower means tough times for truckers.
What is more troublesome is the claim that freight demand is declining. Wha' happened? Isn't the economy expanding at a gangbusters rate, with Americans snapping up all sorts of gew-gaws at breakneck pace? Why does this report not fit with the administration claims that everything's just fine ("Don't worry, be happy" comes to mind)?
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