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The annual stockholders meetings for the state’s largest trucking companies have been jubilant events this year following the strongest first quarter the industry has seen in at least four years.

“You are just now seeing the return to good profits,” Wayne Garrison, chairman of the board for J.B. Hunt Transport Services Inc. of Lowell, told stockholders at the company’s annual meeting April 16.

“This will become one of the top companies in America,” Will Garrison, vice president of operations for American Freightways Corp. of Harrison, told stockholders at the company’s April 23 stockholders meeting.

“We are going to have a great year,” James Speed, chairman of the board for USA Truck Inc. of Van Buren, said at his company’s annual meeting.

If the first quarter is any indication, the trucking industry could be rolling into record territory.

“The first quarter looked as good, in a lot ways, as the first quarter of 1994, which was one of the best years in history for the industry,” says Tim Quillin, an analyst with Stephens Inc. of Little Rock. “As long as the current economic fundamentals hold, the trucking industry will have a great year.”

Hunt led all the state’s trucking companies in the improvements over last year. The company’s net income jumped from $600,000 in the first quarter of 1997 to $9.5 million in the first quarter of this year, an increase of more than 1,500 percent. The increase pushed the company’s earnings per share from 2 cents in the first quarter of 1997 to 27 cents in the first quarter of this year, an increase of about 1,100 percent.

American Freightways’ net income increased 118 percent from $1.5 million in the first quarter of 1997 to $3.2 million in the first quarter of this year. USA Truck Inc. of Van Buren increased its net income 82 percent from $1.3 million to $2.3 million. Arkansas Best Corp., the parent company of ABF Freight System Inc. of Fort Smith, brought its net income from a loss of $1.4 million in the first quarter of last year to a profit of $2.5 million for the same quarter of this year, an increase of almost 400 percent.

Quillin attributes the first-quarter results to a strong economy, declining fuel prices, gridlock on the nation’s railroad system and mild winter weather conditions created by the effect of El Nino. Quillin has recommended that investors buy stock in four of the five companies, a recommendation based on his projection that the companies’ stock will increase in value by more than 20 percent during the next 12 months. Quillin rates American Freightways stock as “outperform,” a designation meaning that the value of the stock should increase by 10 to 20 percent during the next 12 months.

Quillin and Stephens Inc. have remained confident in Hunt despite general pessimism on Wall Street when Hunt increased driver pay by 33 percent last year. Stephens was the only one of the eight brokerage firms that follows the company to maintain its “buy” recommendation after the pay increase.

Already this year, Hunt has exceeded even the optimistic predictions of Stephens Inc. Quillin had first predicted the company’s stock would reach $24 a share this year. In February, he increased the prediction to $26 a share. Currently, the stock is trading at more than $30 a share.

“Even our optimistic expectations were exceeded,” Quillin says. “It’s a clear indication that they’ve offset the cost of increase driver pay.”

Hunt’s stock price has doubled during the past year. Hunt executives have told analysts they expect the company’s earnings per share to increase to $2 this year and to $3 in 1999. Quillin says those are achievable goals for the company.

Quillin ranks Arkansas Best Corp. as the best stock investment in the trucking industry. Arkansas Best had a slight decrease in total revenue for the quarter from $394.6 million in the first quarter of 1997 to $387.9 million this year. However, the company brought its net income from a loss of $1.4 million to a profit of $2.5 million and increased earnings per share from a loss of 7 cents to earnings of 13 cents per share.

“The company is getting no credit for being the best long-haul carrier in the nation,” Quillin says. “Their stock is incredibly undervalued.”

Arkansas Best and its flagship division, ABF Freight, had a difficult couple of years after acquiring Worldway Corp. in 1995 but began making improvements last year. The company’s net income for 1996 was a loss of $36.6 million. For 1997, it had a net income of $15.3 million. The earnings per share changed from a loss of $2.10 per share in 1996 to an income of 56 cents per share last year.

The company has settled much of the debt it incurred in the acquisition and either sold or integrated the assets it acquired. However, its Clipper Worldwide division continues to struggle with shipping delays created by problems in the railroad industry.

“They are past the hurdles,” Quillin says.

Quillin expects the stock to reach $19 a share by the end of the year, an 80 percent increase over its current trading price of almost $11 a share. He predicts earnings per share of about $1.20. Most of the growth will come from reducing debt further and improving internal operations, he says.

USA Truck and PAM Transportation Services Inc. of Tontitown are two other undervalued and undiscovered stocks, Quillin says. Both shared in the prosperity of the trucking industry’s first quarter.

The earnings per share for USA Truck increased 79 percent from 14 cents in the first quarter of 1997 to 25 cents in the first quarter of 1998. The company’s total revenue increased from $30.7 million in the first quarter of 1997 to $35.2 million in the most recent quarter, a 15 percent increase.

Analysts expect the company’s revenue to grow about 16.5 percent this year and the earnings per share should reach about $1.10. Much of the growth will be the result of cutting costs and improving internal operations, Quillin says. The company has at least 20 different two-person teams analyzing almost every aspect of the company to find savings, he says.

The company’s stock is trading at a 38 percent discount to the market and a 15 percent discount to its peers, Quillin says. He expects a year-end stock price of $20 per share, a 26 percent increase over its current price of about $16 per share.

The same is true of PAM. The company’s stock is undervalued at a 46 percent discount to the market and 31 percent discount to its industry peers. Quillin expects the company’s stock to reach $15 by the end of the year, a 39 percent increase over its current price of $10.50 a share.

“PAM is the epitome of an undervalued, undiscovered stock,” Quillin says. “The lack of interest on Wall Street in the company is frustrating to me.”

PAM has found a niche in the trucking industry providing dedicated service, mostly to the automotive industry. Dedicated service was 32 percent of the company’s business in 1993 but had doubled to 65 percent last year and is expected to increase to 68 percent by the end of 1998. A contract with General Motors Corp. provides about 25 percent of PAM’s revenue.

“We believe that PAM, with its enviable book of dedicated business, is the most attractive take-out candidate in our truckload universe,” Quillin says.

Dedicated service allows PAM to contract with shippers who are responsible for the cost of all miles the truck travels, loaded or empty. The system keeps the company’s utilization of equipment high and improves driver retention by allowing the drivers more time at home.

PAM also has made two acquisitions in the last three years and is looking for more acquisitions for this year. Quillin believes the company will purchase another trucking company within the next six months.

For the first quarter of this year, PAM’s total revenue was up 8.6 percent from $32.6 million to $35.4 million. Net income increased from $1.3 million to $1.9 million with earnings per share increasing from 16 cents to 23 cents.

American Freightways doubled its earnings per share from 5 cents to 10 cents over the first quarter of last year. Net income increased by 118 percent from $1.5 million to $3.2 million and total revenue increased 19.5 percent from $193.1 million to $230.6 million.

Quillin says he is less enthusiastic about American Freightways than the other trucking companies but expects the company to continue improving.

“I don’t assume there will be any dramatic turnaround, but things will improve over time,” he says.

The company needs to improve its overall system productivity and decrease operating expenses, Quillin says.

The company plans to buy 1,000 new tractors this year, increasing the fleet size to 5,766 tractors. Plans also include buying 1,600 new trailers, increasing the number to 14,392. Company officials hope to reach the $1 billion mark in total revenue this year, which would be a 15 percent growth over 1997.

Quillin expects the company to reach $990 million in total revenue this year. He predicts the stock price will increase by the end of the year to $14 per share, a 12 percent increase from its current price of almost $12 a share. Earnings per share are projected at 80 cents.