Bumpy Roads Ahead for 8 Truckers on High Price/Earnings, Weak Technicals

NEW YORK (TheStreet) – Most trucking companies have enjoyed life in the fast lane so far in 2014. Now it seems like the roads ahead are bumpy. The eight truckers noted here have elevated 12-month trailing price-to-earnings ratios between 21.3 and 26.3.

Five of eight have declining 12x3x3 weekly slow stochastics and closes on Friday below their five-week modified moving averages will result in negative weekly chart profiles.

The Dow Transportation Average closed at 8154 on Tuesday and will have a negative weekly chart on a close Friday below its five-week MMA at 8174.

Note that six of eight truckers have gains of 16% to 47% year to date.

Here are the post-earnings for these eight companies. Two “crunching the numbers” tables follow.

Con-Way (CNW) ($50.73) has been above its 200-day simple moving average at $42.97 since April 17 and set a multiyear intraday high at $50.98 on July 1. The stock traded as low as $47.06 on July 29 then popped above its 50-day SMA at $49.00 after beating analysts earnings estimates on July 30.

The weekly chart is positive but overbought with its five-week modified moving average at $49.03 but a close below $49.03 would shift the chart to negative. Semiannual and monthly value levels are $46.47 and $45.97, respectively, with a weekly pivot at $50.93.

Heartland Express (HTLD) ($23.23) beat analysts earnings estimates on July 18 and the stock set an all-time intraday high at $24.23 on July 24. The stock is above all five moving averages in the second “crunching the numbers” table.

The weekly chart is positive with its five-week MMA at $22.27, but the price pattern appears parabolic. Quarterly and semiannual value levels are $20.85 and $20.19, respectively, with a weekly pivot at $22.11 and monthly risky level at $24.84.  

JB Hunt (JBHT) ($76.55) set an all-time intraday high at $79.89 on Jan. 22 then traded as low as $69.33 on March 25. The 200-day SMA has been a magnet at $75.10 since Jan.29. The company reported quarterly earnings on July 15 and matched analysts' estimates. Given positive guidance the stock popped from $72.94 on July 15 to $79.79 on July 16 then returned to the 200-day at $75.10 on Aug. 7.

The weekly chart becomes negative on a close on Friday below its five-week MMA at $76.31. Weekly and annual value levels are $75.09 and $67.62, respectively, with a monthly pivot at $76.33 and semiannual and quarterly risky levels at $81.15 and $81.61, respectively.

Knight Transportation (KNX) ($24.27) beat earnings estimates on July 23 and the stock popped to an all-time intraday high that day at $26.32. The stock reversed direction and has been below its 50-day SMA at 24.11 since July 31.

The weekly chart becomes negative on a close on Friday below its five-week MMA at $24.04. Quarterly and semiannual value levels are $22.07 and $18.00, respectively, with a weekly pivot at $23.70 and monthly risky level at $27.68.

Landstar (LSTR) ($67.22) beat earnings estimates on July 23 and had a crazy looking spike to an all-time intraday high at $73.95 on that day. This spike was quickly reversed as the stock traded as low as $64.20 on Aug. 6 briefly below its 50-day SMA at $64.78.

The weekly chart shifts to negative given a close on Friday below its five-week MMA at $65.21 as its stochastic reading is declining. Semiannual and annual value levels are $61.51 and $50.99, respectively, with a weekly pivot at $65.18 and quarterly and semiannual risky levels at $67.18 and $67.20, respectively.  

Old Dominion (ODFL) ($64.91) set an all-time intraday high at $65.34 on June 9 then dipped to as low as $61.17 on July 18 which was below its 50-day SMA at $63.24. The trucker beat analysts earnings estimates on July 31 and the stock traded as high as $65.31 on Aug, 11.

The weekly chart is positive with its five-week MMA at $63.32. Weekly and semiannual value levels are $62.10 and $55.49, respectively, with a semiannual pivot at $64.37 and quarterly and monthly risky levels at $66.46 and $66.97, respectively.  

Saia Inc. (SAIA) ($47.98) set an all-time intraday high at $47.93 on July 23 then dipped to as low as $42.25 on July 30 after missing analysts earnings estimates on that day. The stock rebounded to $47.11 on Tuesday.

The weekly chart is neutral with its five-week MMA at $45.24 with declining stochastics. Monthly and weekly value levels are $45.31 and $44.33, respectively, with a quarterly pivot at $46.67.

Werner Enterprises (WERN) ($25.05) set an all-time intraday high at $27.04 on July 1 then plunged below its 200-day SMA at $25.31 on July 28 in reacting to matching analysts' earnings estimates. The stock traded as low as $24.31 on Aug. 6.

The weekly chart is negative with its five-week MMA at $25.45 and 200-day SMA at $24.01. Annual value levels are $23.77 and $19.35 with a weekly pivot at $24.45 and quarterly and monthly risky levels at $26.04 and $27.14, respectively.  

Crunching the Numbers with Richard Suttmeier: Moving Averages & Stochastics

This table provides the technical status for the stocks profiled in today's report.

The table also shows its 12-month forward price to earnings ratio and dividend yield.

There are five columns with moving average titles: Five-Week Modified Moving Average, 21-Day Simple Moving Average, 50-Day Simple Moving Average, 200-Day Simple Moving Average and the 200-Week Simple Moving Average.

The column labeled 12x3x3 Weekly Slow Stochastics shows the pattern on each weekly chart with readings from Oversold, Rising, Overbought, Declining or Flat.

Interpretations: (stocks below a moving average listed in Red are below that moving average)

Five-Week Modified Moving Average (MMA) is one of two indicators that define whether or not a weekly chart profile is positive, neutral or negative. The other is the status of the 12x3x3 weekly slow stochastic.

A stock with a positive technical rating is above its five-week MMA with rising or overbought stochastics.

A stock with a negative technical rating is below its five-week MMA with declining or oversold stochastics.

A stock with a neutral technical rating has a profile that is not positive or negative.

The 200-Week Simple Moving Average (SMA) is considered a long-term technical support or resistance and as a "reversion to the mean" over a rolling three- to five-year horizon.

The 21-Day Simple Moving Average is a short-term technical support or resistance used by many hedge fund traders to adjust positions. A stock above its 21-day SMA will likely move higher over a rolling three to five day horizon and vice versa.

The 50-Day Simple Moving Average is also a technical support or resistance used by many strategists and commentators in financial TV.

The 200-Day Simple Moving Average is another technical support or resistance and I consider this level as a shorter-term "reversion to the mean" over a rolling six- to 12-month horizon.

Crunching the Numbers with Richard Suttmeier: Earnings & Where to Buy & Where to Sell

This table shows the date the company reported quarterly results, the earnings per share and the beat or miss.

The table then presents the levels at which to buy on weakness and where to sell on strength.

Value Levels, Pivots and Risky Levels are calculated based upon the last nine weekly closes (W), nine monthly closes (M), nine quarterly closes (Q), nine semiannual closes (S) and nine annual closes (A). I have one column for pivots, which is a magnet for the period shown. The columns to the left of the pivots are first and second value levels. The columns to the right of the pivots are first and second risky levels.

Investors who wish to buy a stock should use a good-until-canceled GTC limit order to buy weakness to a value level. Investors who want to sell a stock should use a GTC limit order to sell strength to a risky level.

At the time of publication, the author held no positions in any of the stocks mentioned, although positions may change at any time.

Follow @Suttmeier

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

TheStreet Ratings team rates CON-WAY INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate CON-WAY INC (CNW) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and solid stock price performance. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Road & Rail industry average. The net income increased by 25.1% when compared to the same quarter one year prior, rising from $42.90 million to $53.67 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 9.9%. Since the same quarter one year prior, revenues slightly increased by 8.0%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.63, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, CNW has a quick ratio of 1.55, which demonstrates the ability of the company to cover short-term liquidity needs.
  • Net operating cash flow has increased to $126.19 million or 16.37% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -1.26%.
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.

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