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The short term for freight transportation fundamentals is “bleaker” than many investors believe, and the medium- to long-term outlook may be more robust than investors expect.

That’s the conclusion that Stifel Nicolaus Co. Inc. analysts John Larkin and David Ross drew after attending an Americas Commercial Transportation Research Co. L.L.C. seminar held May 20 and 21 in Indianapolis.

Freight transportation fundamentals face several headwinds in the short term, the pair wrote in a research note issued on Tuesday, including excess capacity; lenient lenders, lessors and finance arms of equipment manufacturers; “intensive” pricing competition; and slightly rising fuel prices.

“Over the medium to long term, we believe supply and demand may tighten dramatically, even if we do not recover all of the freight lost since the freight decline began in mid-2006,” the analysts wrote. Factors affecting supply include tighter federal regulations for truck safety and security, more highway congestion and “deteriorating” driver demographics.

Given that view, the pair said the companies they like “are those that are insulated from intensive pricing competitions and/or serve key core carrier roles with customers that have already sufficiently de-stocked inventories, or those that tend to serve the non-cyclical end-user demand markets.” The companies that fit that bill, and which also have attractive stock valuations, include Kirby Corp., CSX Corp., and Norfolk Southern Corp., they wrote.

— By Desiree J. Hanford. A Chicago-based free-lance writer, Hanford covered the equities market, including transportation, for Dow Jones & Co. for 10 years.