Fallen Angels Part III & Small Stocks, Big Trucks Part II: Forward Air $FWRD

If you can talk with activists and keep your virtue,

Or walk with bankers—nor lose the common touch,

If neither foes nor shareholder lawsuits can hurt you,

If all investors count on you, but none too much;

If you can fill the unforgiving dry van

With thirty pallets’ worth of run,

Yours is the Forward Air and everything that’s in it,

And—which is more—you’ll survive the Omni Acquisition, my son.

• Rudyard Kipling probably

We are in a trucking super-cycle, and with the recent earnings results from J.B. Hunt, the market is finally starting to wake up to it. The data center buildout is accounting for around 7% of the freight market, higher oil prices are increasing demand as well as the US scrambles to boost exports, and we haven’t even had the new Fed Chair cut rates and unfreeze the housing market yet. I want more exposure to trucking, I like companies with torque, either through operating leverage, financial leverage, or both.

I don’t often get the entry and exit right, but in the case of Forward Air (FWRD), I did alright. In 2023 FWRD announced a transformative acquisition, (management always calls it transformative when they overpay), of Omni Logistics. The stock sold off on the news, the valuation was rich, and we were in the middle of a rate hiking cycle. Freight was strong during Covid, so Forward Air was setting up for a drop in revenue and a multiple compression at the same time, but management engaged in a cluster of insider buying to calm the markets and as a gesture of confidence that there were synergies to be found. I started a small position somewhere around $70, it had fallen from over $100.

You can find my initial writeup here:

The strategic acquisition was so large that it crossed the 20% dilution threshold to require a shareholder vote in Tennessee. In order to intentionally bypass shareholders, Forward structured the Omni acquisition half in stock and half in preferred stock which quickly converted to common. Lawyers saw through this charade quickly, and lawsuits were filed. But Forward management had already agreed to acquire Omni, which sued to enforce the acquisition agreement. The CEOs of both Forward and Omni resigned in disgrace. Under the noise of all these lawsuits, the stock price fell from $70 to around $15, where I 5x’d my position size.

A few months later, Forward received an acquisition offer, and the stock rallied to around $41, where I sold my entire position. It’s rare, but in this one instance, I made money on this total trainwreck of a situation. The acquisition offer was later rescinded, 2025 was a tough year for freight, and the stock fell as low as $15. It’s currently rallying to $21.79 as the news of the trucking supercycle is slowly permeating the marketplace.

I always felt that the fit and the synergies of the Omni acquisition weren’t terrible. It’s fair to criticize the price, but there was a path where Forward would upsell Omni’s very sticky business relationships. Unfortunately, during the chaos of having management changes during a business integration, Forward did lose some of those Omni clients.

But I think the bigger picture overall is that freight has been dead for three years, but now it’s suddenly bouncing back stronger than ever. Forward Air is a multifaceted logistics company, but the primary focus is Less Than Truckload (LTL) shipping. If companies need to ship something that isn’t big enough for a full container, it goes on an LTL, mixed with other loads going the same direction, if volumes are strong enough. Forward’s market position is that they endeavor to be the quality leader with the fewest lost, damaged, or late deliveries. And despite how slow things were in 2025, FWRD was free cash flow positive by about $30 million.

The types of things that get shipped LTL include specialized equipment for our current industrial renaissance, but a large percentage is luxury appliances for clients that are renovating their homes and aren’t satisfied with the models in stock at Home Depot. Unlike Flatbeds, LTL is much less of a pure exposure to this booming industrial renaissance. But unlike Universal Logistics, Forward Air is trading very cheaply, it routinely traded around 2.5x Enterprise Value to Sales, and it sits around 1.0x today.

With such a heavy debt burden from the Omni acquisition, $725 million at 9.5% and $1.045 billion at SOFR +4.5%, even without a multiple rerating, the stock could easily go up 20% in a year just from paying down debt with historic free cash flow. But with increased volumes from a freight recovery, operating leverage, debt paydown, and a multiple re-rating, Forward Air could easily be a multi-bagger over two or three years. FWRD has trailing twelve month EBITDA around $300 million, a strong year should be closer to $400 million, and interest expense is around $180 million annually.

The key thing about LTL is volumes, trucks shipped partially full are much less profitable than those that are completely full. With the industrial renaissance and reshoring, is there going to be an increase in high-value equipment that needs to be moved around by the carrier with the lowest loss ratio? With the data center buildout and the AI revolution, will there be an increase in cables, racks, servers/components, spare parts, electrical gear, HVAC pieces, etc. that need to be moved around in a hurry by the company with the lowest loss ratio? Even with a management transition, the quality continues to increase and the claims ratio continues to fall.

If the freight market is strong for the next two years, by the end of 2027, FWRD will have paid down $200 million of debt, revenues will probably grow from $2.5 billion to $2.8 billion, and multiples could expand from 1.0x EV/Sales, then the stock price could go from $16.71 today to between $32 and $80. The big prize remains upselling to LTL volumes to Omni’s business relationships, but winning business clients takes time. In the meanwhile, US trucking volumes continues to increase, and we haven’t had the new Fed Chair to cut rates and unfreeze the housing market. As more homes transact, more luxury appliances need to be moved around. The debt burden is high, but FWRD was free cash flow positive even during 2025, which should be the trough of the cycle.

Forward Air (FWRD) $21.72: $32 by the end of 2027 base case

Forward Air (FWRD) $21.72: $80 by the end of 2027 bull case