Trucking Company Earnings Will Help Test Old Theory

I have been studying, trading, and writing about the market for over 30 years. When I first started studying the stock market, one of the first theories on investing that I remember learning about was the Dow Theory.

One of the main ideas in Dow Theory is that the transportation companies can be a leading indicator for the overall economy.If transportation companies are seeing a decline in revenue or a slowdown in the demand for their services, it’s a sign that the overall economy is slowing. Conversely, if the transportation companies are seeing an increase in the demand for their services, the economy is set to expand.

The Dow Theory will get a partial test on October 27 and 28 as three different trucking companies will report earnings. Old Dominion Freight Lines (ODFL) will report on October 27. CH Robinson Worldwide (CHRW) and Werner Enterprises (WERN) will both report on October 28. The trucking industry, along with railroads and shipping, are major parts of the Dow Transportation index.

With the companies set to report earnings, the sentiment toward these stocks isn’t very bullish overall. Analysts are pretty skeptical of CH Robinson and Old Dominion, and short sellers are pretty skeptical of CH Robinson. The table below shows the analysts ratings with the figures showing buys/holds/sells. The SIR column shows the short interest ratio for each stock.

That narrative from analysts doesn’t match the Tickeron scorecard for these three stocks. Tickeron has Old Dominion rated as a “strong buy” and CH Robinson and Werner both get “buy” ratings.