Research firm Stifel upgraded three trucking companies - J.B. Hunt (JBHT), Heartland Express (HTLD), and USA Truck (USAK) - to Buy from Hold, saying that the sector is poised to benefit from multiple positive catalysts in the next year.

POSITIVE CATALYSTS: The trucking "spot market is red hot," partly due to the expected launch in late 2017 or early 2018 of a rule which will require all truck drivers to use electronic logging devices, according to Stifel analyst John Larkin. Moreover, FEMA's use of trucks to rush supply to areas hurt by the recent hurricanes has transformed the freight market "from modestly positive to strongly positive," the analyst stated. Other catalysts include the need to rebuild structures damaged by the storms and the upcoming holiday shopping season, Larkin stated. Taken together, these trends should produce "a prolonged period of elevated demand, strong spot rates, and sizable mid- to high-single digit contract price hikes," predicted Larkin. He estimated that truckload prices would rise 4.5%-8.5% next year during what he calls the "mother of all capacity shortages" Additionally, the industry could see a significant amount of M&A next year, as borrowing costs remain low and labor shortages are making it difficult for companies to generate organic growth, the analyst stated.

J.B. HUNT: The company's high leverage to intermodal gives it an advantage in the "mother of all capacity shortages" environment, as intermodal is the best way to overcome driver shortages, according to Larkin. The analyst added that the company's dedicated unit will benefit from its ability to perform many difficult and specialized tasks. He raised his price target on the stock to $125 from $91.

HEARTLAND EXPRESS: Heartland is "a great operating company," and its recent acquisitions will enable it to lower its costs, Larkin believes. Moreover, the analyst thinks that the company's balance sheet "remains strong." He raised his price target on the shares to $28 from $22.

USA TRUCK: The company has had difficulty turning a profit, but its new management team is adept and is "in a position to be fully supported by a much better operating environment for truckload carriers," according to Larkin. He raised his price target on the shares to $15 from $9.

PRICE ACTION: In morning trading, JB Hunt rose 1.1% to $110.10, Heartland Express climbed over 5% to $24.59 and USA Truck advanced 9% to $14 per share.