Results from J.B. Hunt Transport Services Inc. raised fear of a recession in freight. Photograph by Luke Sharrett/Bloomberg
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Investors are obsessed with the word “recession”.

But Cowen analyst Jason Seidl doesn’t want to hear about a “freight recession.” To Seidl, fears that the trade war with China will slow down the U.S. trucking sector are overblown. He put his money where his mouth and upgraded shares of three logistics providers on Wednesday.

Still, investors’ heightened sensitivity to the “R” word makes sense—the term has been popping up more often. Freight rates have fallen for four consecutive months, while the usual definition of a recession is a decline for two quarters.

Wall Street also fretted about an earnings recession in the first quarter of 2019 as companies issued gloomy forecasts, but things didn’t turn out to be as bad as feared. Executives tend to make conservative forecasts about their results and then beat them.

Automotive markets, on the other hand, are in a recession. Car sales are falling in the U.S. and China and industry data provider Edmunds expects the decline to reach 3% in the U.S. this year. The Russell 3000 Auto & Auto Parts index has fallen 2% in 2019, trailing the S&P 500 by about 16 percentage points.

Fears of a recession in freight are on the rise partly because of earnings reported by industry bellwether J.B. Hunt Transport Services (ticker: JBHT). Hunt dropped 5% after turning in first-quarter results that didn’t measure up to Wall Street’s expectations.

Overall, our cautious view on the [logistics] group is unchanged, which we believe has been substantiated during reporting,” wrote Baird analyst Ben Hartford in a research report summarizing first-quarter earnings. “We’re still looking for a trough in industry growth rates to become more constructive,” or positive about freight companies’ prospects.

Slower growth—in this case for the cost of trucking—is often a bad sign, but that might not be the case this time.

“It’s not that 2019 has been so bad,” writes Seidl. “2018 was just really, really good.” He believes rates appear to be weak because shipping prices were high in the first quarter of 2018.

“While spot [freight] rates are negative year over year, they are still up [more than] 5% when indexed to the January 2017 baseline,” Seidl pointed out in his report on Wednesday. “Similarly, contract [freight] rates, while only up 3.1% year over year compared with +21.3% in mid-2018, are still up close to 20% when indexed to January 2017.”

Seidl upgraded shares of ArcBest (ARCB), Covenant Transportation (CVTI) and Hub Group (HUBG) to Outperform from Market Perform based on his belief that investors have turned too bearish on the sector.

He left his price target unchanged on ArcBest at $40 a share, but cut his targets for both Covenant and Hub by $1, to $23 and $53, respectively. Both ArcBest and Covenant are down more than 12% in 2019, while the Dow Jones Industrial Average is up 10%. Hub stock is up more than 10%, but shares are trading at a 12.4 times estimated 2019 earnings, a discount to their historical average.

Recessions don’t have to be all bad. They can be a chance to pick up good stocks at a discount.

Even though Baird’s Hartford sound more conservative than Seidl, both analysts agree on Hub Group. Hartford rates the shares at Outperform with a $52 price target, 27% higher than recent levels and 16 times his estimate for 2019 earnings, in line with historical averages. (Hartford doesn’t cover Covenant or ArcBest.)