Morgan Stanley: Freight Transportation — 1Q26 Preview: Defensive Qualities in an Aggressive World
Summaries are public. PDF access requires an active membership; all members have the same access. Sign in
Morgan Stanley views the setup entering 1Q26 earnings season as potentially the most favorable in four years, though significant demand-side uncertainty persists. Market focus will shift toward supply-side industry dynamics. Positive factors include momentum carrying over from late 2025, truckload spot rates holding flat, and the TLFI index rising approximately 30% year-over-year to its highest level in twelve years. Sustained regulatory pressure on supply continues to support freight rates, with potential tariff resolutions offering additional upside. However, extreme weather in January and February, combined with the March Iran conflict and oil prices persistently above $100, may delay restocking decisions. The report forecasts four beats, ten misses, and nine in-line results this quarter. By subsector, Class I rail volumes grew under 2% year-over-year with weather and fuel cost headwinds. Truckload and LTL carriers benefit from high rates but face volume shortfalls. Third-party logistics show bifurcation, with brokerage facing high-rate, low-volume challenges. The industry view remains Attractive, with top picks including KNX, ODFL, and CSX.