Heartland Express, Inc. (NASDAQ:HTLD)

TheKingOfFuzz (< 20) Submitted: 10/31/2006 3:59:41 PM : Start Price: $13.24 HTLD Score: +5.95

Even aside from their squeaky-clean balance sheet, there's plenty to love about Heartland.

For one thing, they've purchased new trucks ahead of the deadline for EPA '07. Starting January 1, 2007, all trucks sold must comply with more stringent emission requirements set by the U.S. Environmental Protection Agency. Why is this significant?

Well, have you ever bought a new car on the first year the maker offered the model? If you haven't, ask anyone who owns a 2000 model-year Ford Focus what it's like. I'm willing to bet they've drank more cups of complimentary car-dealership coffee and read more out of date issues of Time magazine than you have. Why? Because new automotive technology is like a phat beat: it breaks down.

Hence, a rash of pre-buying as trucking firms have elected to scoop up proven engine technology while it's still available. Heartland is on top of the ball here. Just check out their last 10Q: 475 new trucks purchased, bringing the average age of their tractor fleet to 1.2 years as of September 30.

More importantly, the company is poised for an aggressive westward expansion. Freight from Asia is piling up at the Port of Long Beach like shredded barbacoa piles up in a Chipotle burrito -- which is to say, sky-high -- and Heartland is going to get its piece of that pie.

Funny thing though...in the trucking business, it’s never really about freight these days. Seriously, ask anyone. Thanks to busily churning Chinese sweat shops and America’s insatiable demand for iPods, there are truckloads and truckloads of freight out there just waiting to be hauled...ah, I can see them now, all the trailers lined up in a row, their shiny couplers winking like a child’s wide, expectant eyes on Christmas morning.

Only problem is (and believe it or not, a whole mess of trucking executives at a trade show in Texas just voted this the industry’s number-one issue) there are fewer and fewer people around to actually haul the stuff from point “A” to point “B.”

Not that they’re miracle workers, but I believe Heartland has this angle covered too. You’ll be hard-pressed to find a carrier that’s willing to pay its drivers more. In the midst of a driver shortage that’s pinching the industry harder than Aunt Hilde used to pinch your rosy-pink cheeks at Thanksgiving, Heartland is in a great position to recruit and retain, simply because they pay people more to get behind that wheel.

It’s pretty academic, really: to grow your freight hauling business, you need to grow your fleet...to grow your fleet, you need to recruit more drivers...to recruit more drivers, you need to convince them that driving your truck is preferable to yanking the handle on the slurpy machine or flipping burgers...and they ain’t gonna buy it if you don’t pay them an appropriate premium...at least the guy who works the graveyard shift at 7-11 isn’t away from home 6 days a week.

Anyway, for these reasons (and because the bright-red, heart-shaped logo on their trailers makes me feel warm and fuzzy when I see it at the Maryland House rest area on I-95 in the middle of the night when I'm on my way to the Jersey Shore) I’m willing to bet Heartland spanks the S&P over a year or so.