CEO Of Heartland Express Makes A Large Purchase – Insider Weekends

Key Insights

• Heartland Express (HTLD) is a full truckload freight and trucking company that specializes in the short to medium haul market
• The company has made a series of acquisitions over the past few years, with the last one being the $525 million acquisition of Contract Freighters in August 2022
• While the acquisitions have led to extremely high levels of growth for Heartland Express, the balance sheet ended up with a lot of debt. The company now has a P/E of over 30 and an EV/EBITDA of less than 6.

In our September Monthly Newsletter, we did a deeper dive into the trucking company Old Dominion Freight Line (ODFL) following a series of buybacks by the company. We were especially impressed by the quality of the experienced leadership team as well as the bid Old Dominion had put in for one of its largest competitors, Yellow, which recently declared bankruptcy. While Old Dominion was an attractive opportunity, the one drawback lay in the current state of the trucking and freight industry. We discussed the drawback and wrote the following last month:

The Logistics Managers Survey is a monthly study aimed at revealing the status of US logistics activity. The Logistics Manager’s Index (LMI) score is a combination of eight unique components that make up the logistics industry. The components include: inventory levels, inventory costs, warehousing capacity, warehousing utilization, warehousing prices, overall transportation capacity, transportation capacity utilization and transportation prices. The LMI is calculated using a diffusion index, in which any reading above 50 percent indicates that logistics is expanding; a reading below 50 percent is indicative of a shrinking logistics industry.

Unfortunately, the LMI experienced a sixth consecutive monthly decline, reaching a record low of 45.4 in July 2023, signaling another contraction in the logistics sector, primarily driven by a decline in inventories. Inventory levels have been steadily decreasing, with a reading of 42.9, the second-lowest ever recorded. Additionally, the growth in inventory costs also showed a decline at a reading of 57.1. Furthermore, transportation utilization and transportation prices are contracting, although at reduced rates, with readings of 46.8 and 32.8, respectively. Despite the current downturn, survey respondents remain optimistic about the future, predicting an expansion rate of 55.4 over the next 12 months, reflecting the strength we are seeing in the economy from Q1 and Q2 2023 GDP numbers.

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