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    Keep on Trucking: Sunlight or Headlights at the End of the Tunnel?

    by Stephen E. Kylander

    Over the past year, trucking stocks have been discovered, or perhaps rediscovered, by investors. Stock prices have surged, initial public offerings and secondary offerings have been floated, and CNBC lunch chats have touted the merits of the sector as a beneficiary of a domestic economic recovery.

    Such enthusiasm appears to have been well-founded as volumes, pricing, and profit margins improved for almost all industry operators during 2003, and this year has started off with the most robust industry conditions in recent memory. Looking ahead, the good news is expected to continue, with earnings growth projected to exceed 20% this year and next for almost all trucking companies.

    Normally all of this might be a recipe for premium stock valuations. However, with an average calendar-year 2004 price-earnings ratio of 16, trucking stocks trade at roughly a 15% discount to the overall market and well below their prospective three-year average growth rate.

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