I recently discussed the difficulties of the trucking industry in an economy that's still a long way from a full recovery.
While the American Trucking Association's recent tonnage index indicated its largest decline since the economic recovery began in early 2009, there has also been positive data showing that some segments of the industry are not deteriorating. The most recently reported durable-goods orders, excluding transportation equipment orders like aircraft, showed an increase of 2% -- much larger than economists were expecting. Durable-goods orders are important for truckers, because they show that consumers are spending more on "white goods," which include large household purchases like refrigerators and washer/dryers.
While the improvement in durable goods is a boon, overcapacity and overleveraging still plagues operators. Look no further than industry poster child YRC Worldwide
While some companies may have to unwind their significant debt loads though bankruptcy, several important players in the trucking industry do enjoy pristine balance sheets.
Shipping logistics companies and third-party logistics (3PL) parties have made it through the economic downturn relatively unscathed. Perhaps the best of these companies is C.H. Robinson
The intermodal segment has become an important business unit for trucking companies looking to diversify. For J.B. Hunt
Not to be left out, 3PL companies, with their low debt loads, give investors a way to benefit from increasing intermodal volumes without worrying about leverage. While C.H. Robinson is best in breed, logistics companies Expeditors International of Washington
Wait for the turn
Although many strong players with diversified businesses can offer investors exposure to the trucking industry, it makes sense to hold off on asset-heavy truckers that are relying on improved demand to maximize fleet efficiency. Fools should put on the brakes here, at least until we begin to see greater improvement and clarity in key economic indicators.