It's getting more expensive to ship stuff.
That's a headwind for many businesses, but relief for truckers who have been dealing with a painfully long freight recession.
The story is relatively simple: freight markets were booming as the economy emerged from the COVID-19 pandemic, with everyone staying inside and shopping online. Then things opened up, and people wanted to do things. Combined with more capacity, shippers have had a very difficult time since around 2023.
That dynamic is reflected in the sales and earnings of United Parcel Service. In 2019, the company reported an operating profit of $8.2 billion from $74 billion in sales. In 2022, it reported an operating profit of almost $14 billion from sales of $100 billion. In 2025, operating profit was $8.7 billion from sales of $89 billion.
Things were expected to pick up in 2026. And they have. Trucking spot rates, a measure of supply and demand tightness, have shot above 2022 levels.
That's a positive for the trucking space. Of course, the stock market is savvy and forward-looking, which is why shares of less-than-truckload shippers Old Dominion Freight Line and XPO were up 43% and 53%, year to date, respectively, through midday trading on Thursday. Shares of long-haul truckers Knight- Swift Transportation were up 48%. Shares of shipping services players C.H. Robinson Worldwide and J.B. Hunt Transport Services were up 20% and 45%, respectively.
The question for investors is now what's next. Earnings are on deck. They should be good.
"Transports 2Q earnings are likely to be among the strongest in years, as companies benefit from significantly tighter capacity conditions coupled with moderately improving demand," wrote Citi analyst Ariel Rosa on Thursday.
That doesn't guarantee strong stock performance, though. Rosa actually downgraded a few transport stocks some weeks back -- C.H. Robinson, Knight-Swift, Old Dominion, and Saia -- on "extended valuations."
Shares of some have fallen since downgrades, leading him to upgrade Saia and Knight-Swift back to Buy on Thursday. (Coming into Thursday trading, Saia and Knight shares were down 14% and 7%, respectively, over the past month.) Rosa recommends ArcBest and TFI International, too.
Saia now trades for about 32 times earnings expected over the coming 12 months, up from about 28 times a year ago. Knight-Swift trades for 26 times, up from about 24 times a year ago.
"We remain concerned on valuations across much of our coverage, with upside to shares likely to be far more modest in second-half 2026 relative to first half, but acknowledge it is difficult to remain negative into rising earnings," added Rosa.
Valuations are often a concern with any stock, but improvement can lead to higher earnings.
Overall, Wall Street's favorite trucking and transport service stocks are XPO, C.H. Robinson, Ryder, FedEx, and Knight-Swift. The average Buy-rating ratio for those stocks is almost 80%. The average Buy-rating ratio for S&P 500 stocks typically ranges from 55% to 60%.
Combined with Rosa, that is eight stocks -- Saia, Knight-Swift, ArcBest, TFI, XPO, C.H. Robinson, Ryder, and FedEx -- that investors can look at to play improving fundamentals.
As for the rest of the economy, rising freight rates are a headwind, but a manageable one. For-hire transportation represents roughly 3% of the total economy, so rising freight rates might amount to an annual cost increase for everyone else measured in the hundreds of billions. Significant, but total U.S. economic output is north of $30 trillion annually.
Write to Al Root at allen.root@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
July 09, 2026 13:09 ET (17:09 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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