Freight shareholders cheer election results

Taxes

Perhaps the most obvious reason why freight stocks surged following the election is the expectation for lower corporate tax rates. U.S. freight carriers have much to gain if corporate tax rates are cut in a manner similar to 2017 when they were cut from 35% to 21%. Again, Trump has proposed cutting rates further – this time from 21% to 15%. That also serves to explain freight’s outperformance relative to other sectors on Wednesday. 

For many carriers, virtually all their pre-tax income is subject to U.S. corporate tax rates. In contrast, many less freight-intensive companies – such as multinational tech firms – earn large portions of their profit overseas and can avoid paying U.S. corporate taxes by reinvesting that pre-tax profit in those foreign countries rather than repatriating it. 

Multi-modal carrier J.B. Hunt had an effective tax rate of 26.8% in the first nine months of 2024. Its shares were up 4% on Wednesday. (Chart: Yahoo! Finance)

Tariffs

Tariffs are likely a mixed bag for the economy as a whole, but could be great for domestic freight carriers. Tariffs raise revenue, but the primary intention is to bolster U.S. industries, spur domestic manufacturing activity, avoid sending dollars overseas to trading partners using labor and trade practices deemed unfair and support national security. Supply chains don’t change overnight, and certainly much of what is imported is not coming back, but any pickup in domestic manufacturing is bullish for freight carriers. 

Tariffs that protect domestic steel and aluminum producers from overseas competition should not only support those industries, but the haulers of those materials, which include flatbed carriers and the railroads. In fact, rail carload traffic typically increases during periods of expanding industrial production. 

CSX shares were among the top Nasdaq performers on Wednesday before giving back part of that gain Thursday. (Chart: Yahoo! Finance)

In addition, imported goods generally arrive in their finished form, needing only to be distributed to consumption centers. In contrast, goods that are manufactured domestically more often require multiple points of handling, as raw materials and goods in the processes of being produced are moved at intermediate points. That can require shippers to make greater use of LTL carriers. 

LTL carriers, such as Old Dominion, stand to benefit both from greater industrial production and domestic manufacturing. (Chart: Yahoo! Finance)

The ‘Trump trade,’ which supports the thesis of greater domestic manufacturing, also supports bearishness on global trade. That was evident in Wednesday’s trading. For instance ZIM shipping lines retreated 3%. 

Shares of ocean carrier Zim declined 3% following the election results. (Chart: Yahoo! Finance)

Regulations
Regulations should look much different across industries under a Trump administration. Elon Musk expects the merger-wary head of the Federal Trade Commission to be fired and Robert F. Kennedy Jr. is likely to oversee numerous food and drug regulatory agencies that he currently views as ‘sock puppets.’ But, while regulations may get stricter for food (which sent “junk food stocks” lower on Wednesday), regulatory changes should benefit trucking companies. Yesterday, FreightWaves reporters and market experts John Gallagher and John Kingson described 10 changes to trucking policy which, on balance, should reduce truckers’ costs, reduce their lawsuit risk and increase demand.