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Why Shares of U.S. Xpress Are Up (Again) Today

By Lou Whiteman – Jul 30, 2020 at 1:33PM

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An analyst believes the trucking company is set up well over the next year to take advantage of shipping trends.

What happened

Shares of U.S. Xpress Enterprises (USX) are rallying for a second straight day, up 9.3% as of 12:30 p.m. EDT, following the trucking company's second-quarter earnings report. The results came in much better than expected, causing the markets to rethink their outlook for the company.

So what

After markets closed Tuesday, U.S. Xpress surprised Wall Street with a second-quarter profit of $0.18 on revenue of $422.5 million, easily outpacing analyst projections of a $0.13 per-share loss on revenue of $415 million.

Coming into earnings season, investors were worried transportation stocks would be hit hard by the COVID-19 pandemic, which has disrupted industrial production and altered delivery patterns. But U.S. Xpress was able to grow operating income by 85% to $16.3 million for the quarter, in part by bringing down costs.

A truck driving on the open road.

Image source: Getty Images.

The company's adjusted operating ratio -- a measure of operating expenses as a percentage of revenue -- fell to 95.9% from 97.5% a year ago, implying U.S. Xpress is doing a good job controlling costs. That's in part due to U.S. Xpress' use of technology to automate operations.

"I am very pleased with our second quarter results as we are beginning to see the tangible, financial benefits of our strategic initiatives focused on utilizing technology to improve our processes, accelerate the velocity of our business, improve our customers' and drivers' satisfaction, and lower our costs," CEO Eric Fuller said in a statement.

Now what

An earnings beat is often good for a one-day surge, but the continued momentum into Thursday likely is due to investor confidence U.S. Xpress will be able to sustain that performance through the rest of the year.

Bank of America analyst Ken Hoexter upgraded U.S. Xpress post-earnings to a buy from a neutral, saying the company has a solid runway to improve results over the next four to six quarters. Hoexter said U.S. Xpress is "highly leveraged to a rebounding freight volume and rate environment," and said he's encouraged by the company's success using tech to bring down costs.

With the recent jump, shares of U.S. Xpress are now up 89% year to date, and up more than 150% since mid-March. That's a long way to climb in a short amount of time, and it seems likely this sort of a rally won't continue for long. But long-term holders should feel good about the direction in which U.S. Xpress is driving.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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