04:12 PM EDT, 10/14/2024 (MT Newswires) -- Truckload and less-than-truckload carriers' latest quarterly results could be pressured by soft demand in early August and flat spot rates, BofA Securities said Monday.

The brokerage reduced its third-quarter earnings expectations for the truckload and LTL carriers in its coverage universe by 6% on average while raising brokers and freight forwarders' outlooks by 7%. Brokers and freight forwarders likely benefited from a lower cost of capacity, BofA said.

For much of the quarter, spot rates stayed at nearly $1.50 and have only increased to between $1.52 and $1.54 recently, BofA said, citing Truckstop.com and DAT Freight & Analytics data. "Yet shippers remain muted on demand outlook," BofA analyst Ken Hoexter said in a note to clients. "The truckers/LTL's feel the pressure of the elongated freight recession impact on rates."

Truckload demand eased in early August but rebounded by the end of the month. Still, the brokerage expects truckload and LTL carriers' results to be pressured. "With the (Federal Reserve) lowering interest rates for the first time since 2020, the East Coast port strike lasting three days, a Canadian rail strike/lockout, and multiple large (Hurricanes) to start (the fourth quarter) peak holiday season could have support to cause tightness," Hoexter wrote.

As markets lap the fallout from trucking company Yellow's last year bankruptcy, LTL carriers are witnessing decelerating tonnage growth rates, with bottom-end carriers flagging pricing competition, according to the note. "While mid-quarter updates showed expected slowdowns, the rapid growth of Saia's ( SAIA ) volume gains will have earnings eyes focused on its pricing and margin flow through," Hoexter said.

For this year, the firm said its EPS projections are below Wall Street's estimates for a majority of truck-related stocks.

BofA raised its price objectives on the stocks of Saia ( SAIA ), Expeditors International of Washington ( EXPD ) , C.H. Robinson Worldwide ( CHRW ) and RXO (RXO) and lowered them for Knight-Swift Transportation ( KNX ) , ArcBest ( ARCB ) and TFI International ( TFII ) .

BofA said transport stocks could benefit from the election season in the US. "While transport tends to be fairly agnostic toward Presidential elections, given transport (and) infrastructure investments are local issues and supported by both parties, debate over tariffs, lower taxes, and trucking pre-buys are at the fore of investors' minds," Hoexter said.

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