The Zacks Analyst Blog Highlights: UPS, JB Hunt, Old Dominion, Arkansas Best and Covenant Transportation

CHICAGO, July 16, 2013 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include UPS (NYSE:UPS-Free Report), JB Hunt (Nasdaq:JBHT-Free Report), Old Dominion (Nasdaq:ODFL-Free Report), Arkansas Best (Nasdaq:ABFS-Free Report) and Covenant Transportation (Nasdaq:CVTI-Free Report).

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Here are highlights from Monday's Analyst Blog:

Are Trucker Profits Signaling a Market U-Turn?

Friday's profit warning from UPS (NYSE:UPS-Free Report) and today's earnings shortfall from JB Hunt (Nasdaq:JBHT-Free Report) put the transport sector in the spotlight. The results may cause a review of the profit outlook in the freight/transportation sector, and the market to think about making a U-turn.   UPS noted its profits had been hurt by customers trading down to lower cost shipment methods, slower industrial production, and overcapacity in the airfreight market.    The slowdown in international business is not surprising given soft export growth numbers from China and India, and continued sluggish economic growth in Europe.  JB Hunt reported that its truck segment saw a 20% drop in revenues due to a smaller fleet and lower utilization.   The profit results prompt an examination of the Cass Shipping index, which monitors freight shipment volume, for insight into the transportation industry's health.

Shipment and economic activity are slow:

The Cass Shipment index displayed strength in Q2 relative to Q1 averaging 1.12 compared to 1.08, but the three month average of the year over year change in the Index was -1.0% in June compared to +0.7% at the end of March.  Growth in shipment activity has been relatively flat since the summer of 2011 and does not appear to have strong forward momentum.  Despite the economic expansion, the Federal Reserves' index of industrial production has not exceeded the peak prior to the Great Recession in late 2007.  Further, the manufacturing index has been flat to lower since February 2013, showing a pause in growth.  The pace of economic activity has not been helpful to the freight sector and it is not surprising that UPS and JB Hunt disappointed investors with their profit results.  

The market is optimistic on earnings:

Old Dominion (Nasdaq:ODFL-Free Report), Arkansas Best (Nasdaq:ABFS-Free Report) and Covenant Transportation (Nasdaq:CVTI-Free Report) have a Zacks Rank #2 (Buy).  None of the four companies had seen their EPS estimates reduced in the past 30 days.  The agreement among analysts leans constructive for the profit outlook and runs against the recent profit warning from UPS and the short fall from JB Hunt.  Arkansas Best has seen the strongest movement in EPS forecasts.   The enthusiasm toward the sector seems misplaced based on the most recent data points.

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