Wells Fargo upgrades transport outlook on tight capacity, intermodal gains

Wells Fargo has upgraded its transport outlook, citing tight capacity and gains in intermodal transport. A senior vice president, responsible for fleet and transportation at a large shipper with an annual spending of $150 million across modes, noted improving freight conditions and rising prices. The shipper is increasingly relying on intermodal transport to cut costs and improve service acceptance rates.

While the cost of all-in truckload pricing stands at $2.30 per mile, intermodal transport is significantly cheaper at $1.70 per mile. The shipper predicts intermodal rates to climb in the high single digits next year, compared to a 3% to 5% increase in 2026. Furthermore, the company anticipates potentially higher intermodal fuel surcharges due to a 67% discount in comparison to truckload.

The shipper believes the tight supply and demand for truckload services, due to enforcement and demographic challenges, will persist. In response, the company plans to extend contract lengths, increase usage of higher-priced dedicated capacity, and expand its private fleet this bid season to mitigate rising costs. The Montgomery ruling is prompting more shippers to consolidate their spending towards larger, scaled providers across brokerage and asset-based carriers.

Recently issued court rulings have surprised shippers, leading to an internal review of broker liability exposure. Wells Fargo favors JB Hunt for intermodal services due to its growing potential, which is expected to offset costs in 2027. The firm also recommends XPO and Old Dominion Freight Line (NASDAQ:ODFL) for less-than-truckload services, as these companies offer competitive pricing and positive fuel exposure, which could boost profitability.

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