Sunday, July 02, 2006

Sector Snap: Trucking Stocks Rally

Shares of trucking stocks rose briskly Thursday along with the broader market, as investors looked toward an anticipated strong second half for the sector.

Package carrier FedEx Corp. was among the largest gainers, as shares rose $1.66 to $114.63 in midday trading on the New York Stock Exchange. Its chief competitor, UPS Inc., added $1.06 to $82.26 on the Big Board. Among truckers, Arkansas Best Corp. was up $1.42, or 3 percent, to $48.16 on the Nasdaq, and Old Dominion Freight Line Inc. jumped $1.04, or 2.9 percent, to $35.98 on the Nasdaq.

David G. Ross, an analyst with Stifel Nicolaus in Baltimore, said investors in the sector have realized that resilient consumers can offset a slowdown in the housing market.

"What we're seeing today is a sign that people have realized the world isn't coming to an end in the transportation sector, despite all the doom and gloom out there," Ross said.

Ross added that investors are looking back on what was a bright first half for the sector, and know that its strongest months still lie ahead.

"September, October and November are peak months for the industry and capacity will only get tighter," he said, noting that 5 percent to 10 percent of the industry's fleet is parked because of a shortage of qualified drivers. And with consumers still spending more than they earn, capacity constraints could translate into even greater pricing power.

Recent optimism from executives within FedEx's freight unit, and positive earnings preannouncements from Arkansas Best and YRC Worldwide Inc. are also likely driving the sector's activity, he said.

The broader market also provided a boost. In late morning trading the Dow Industrial surged 113.50 points, or 1.03 percent, to 11,087.06. Experts cited better-than-anticipated news that the Gross Domestic Product, perhaps the No. 1 barometer for the economy, zipped ahead in the first quarter at clip of 5.6 percent. Consumer spending, business spending and company profits were also higher in the first quarter versus the fourth quarter of 2005.

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