Deutsche Bank sees mixed third quarter for transportation stocks

Investing.com -- Deutsche Bank adjusted its third quarter earnings estimates for railroad companies on Wednesday, citing fuel surcharge recovery timing issues that shift profits between quarters rather than changing full-year outlooks.

The bank cut its third quarter earnings per share forecasts for rail companies but raised fourth quarter estimates by similar amounts. The changes stem entirely from delays in fuel surcharge recovery. Deutsche Bank's 2026 estimates remain close to consensus. The firm sees the most potential for CSX Corporation to exceed its third quarter forecast.

For Knight-Swift Transportation Holdings (NYSE: KNX), Deutsche Bank maintains its position at the high end of the company's $0.71 to $0.77 earnings per share guidance range. The bank expects truckload results to fall short of early-quarter expectations due to fuel price volatility. Without this volatility, the company would have exceeded its framework, according to Deutsche Bank.

The bank views Knight-Swift favorably heading into the fourth quarter, expecting fuel tailwinds, strong peak demand, and ongoing contract rate increases. Deutsche Bank believes the company's driver recruitment efforts may prove more successful than market expectations reflect.

In the less-than-truckload segment, Deutsche Bank expects Saia Inc to beat estimates, seeing potential for tonnage to exceed expectations following volatility related to its July general rate increase. The bank models in-line results for both XPO Inc and Old Dominion Freight Line Inc, though it sees room for both companies to surpass expectations. XPO could receive an additional boost from buyback activity, while tonnage trends appear improved at both carriers.

Deutsche Bank views the setup for C.H. Robinson Worldwide Inc as particularly favorable. Lower purchased transportation costs are coinciding with contract repricing that better reflects current market conditions. The bank's North American Surface Transportation net revenue growth outlook exceeds consensus by a high single-digit percentage. The company's productivity improvement initiatives continue to progress.

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