We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
3 Stocks to Buy From a Prospering Transport Services Industry
Read MoreHide Full Article
Stocks in the Zacks Transportation-Services industry have an impressive run on the bourses, courtesy of the economic activity-led demand uptick. Despite supply-chain woes and the spread of the Omicron variant, the industry is benefiting from an improved freight demand scenario.
A substantial surge in manufactured goods fueled the transport service providers’ growth. The gradual recovery in the revenue scenario bodes well for the transport service providers with the likes of Expeditors International of Washington (EXPD - Free Report) , Schneider National (SNDR - Free Report) and Matson (MATX - Free Report) well-positioned to gain from the same.
About the Industry
The companies housed in the Zacks Transportation-Services industry offer logistics, leasing and maintenance services to transporters. Some industry players focus on the business of global logistics management, including international freight forwarding. The third-party logistics entities offer innovative supply-chain solutions. They also focus on services like product sourcing, warehousing and freight shipping. The companies have expertise in the fields of trucking, air and ocean transportation. Additionally, some of the players in this industry deliver domestic and international express delivery services. The well-being of the companies in this industrial cohort is directly proportional to the health of the economy. An uptick in manufactured and retail goods, favorable pricing and the betterment in global economic conditions bode well for the industry participants.
3 Key Investing Trends to Watch in the Transportation-Services Industry
Robust Freight Demand: Improving freight market conditions are lending a big boost to the transport-service providers. Agreed, that the Cass Freight shipments Index declined 10.8% month over month in January. But the decline was due to the omicron-led crisis. The overall improving trend is evident from the fact that the measure had improved in October, November and December on a month-over-month basis. With omicron cases subsiding, we believe that the January reading is an aberration, as the freight scenario is expected to improve in 2022. Further, strong growth in airfreight revenues aids freight forwarding companies like Expeditors. The increased usage of charters to meet customer needs following the cancellation of passenger flights (that usually carry freight as well as passenger luggage) is driving air-freight revenues. Such revenues are likely to soar at least in the near term as air-charter business is expected to maintain its uptrend.
Dividend Hikes Signal Financial Strength: With the resumption of economic activities, many companies including some transport service providers are reactivating their shareholder-friendly measures like increasing their respective dividend payouts, which underline their financial strength and confidence in the business. In January, Schneider National announced a 14.3% raise in its quarterly dividend. Also, the likes of Expeditors and Matson announced dividend hikes in 2021.
Oil Price May Increase in 2022 Hurting Bottom Line: The U.S. Energy Information Administration (EIA) in February 2022 increased its oil price forecast. The EIA in its current-month's short-term energy outlook stated that it expects the average Brent spot price to be $82.87 per barrel for the full year. This marks an increase from its January forecast wherein it had expected the average Brent spot price to be $74.95 per barrel for 2022. It projects the same to average $88.13 per barrel for the first quarter of 2022. This estimate is $9.50 per barrel or 12.1% higher than its previous prediction.
EIA’s hiked forecast for oil prices is unfavorable for the transport service providers and might dent bottom-line growth. This is because fuel expenses represent one of the highest input costs for these players.
Zacks Industry Rank Indicates Sunny Prospects
The Zacks Transportation - Services industry is a 27-stock group within the broader Zacks Transportation sector. The industry currently carries a Zacks Industry Rank #64, which places it in the top 26% of 250 plus Zacks industries.
The group’s Zacks Industry Rank, the average of the Zacks Rank of all member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence from this group’s earnings growth potential. Evidently, the industry’s earnings estimate for 2022 increased 24.2% year over year.
Before we present a few stocks that you may want to add to your portfolio, let’s look at the industry’s recent stock-market performance and its valuation picture.
Industry Lags S&P 500 and Sector
The Zacks Transportation-Services industry has underperformed the Zacks S&P 500 composite as well as the broader Transportation Sector over the past year.
The industry has declined 9.1% over this period against the S&P 500’s appreciation of 12.4%. The broader sector has dipped 0.9% during the same time frame.
One-Year Price Performance
Industry's Current Valuation
On the basis of trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), a commonly used multiple for valuing the Transportation-services stocks, the industry is currently trading at 13.85X compared with the S&P 500’s 14.11X. The value is also lower than the sector’s trailing 12-month EV/EBITDA of 14.87X.
Over the past five years, the industry has traded as high as 24.19X, as low as 11.01X and at the median of 16.62X
Enterprise Value-to-EBITDA Ratio (TTM)
3 Transport Services Stocks to Buy
Expeditors International of Washington: This Seattle, WA-based Expeditors is engaged in global logistics management, including international freight forwarding and consolidation for both air and ocean freight. Over the past 60 days, this presently #1 Ranked company has seen the Zacks Consensus Estimate for 2022 increase 7.11%. The stock has gained 9.4% in a year’s time.
Expeditors is being bolstered by the uptick in airfreight revenues. Revenues from the airfreight services unit increased 58.4% year over year in 2021. Efforts to reward its shareholders through dividends and buybacks are very encouraging as well.
Price and Consensus: EXPD
Matson, a Honolulu, Hawaii-based provider of ocean transportation and logistics services, currently sports a Zacks Rank #1. Over the past 60 days, MATX has seen the Zacks Consensus Estimate for 2022 move 86.22% north.
The stock has gained 49.2% in a year’s time on the back of factors like improved freight demand and cost-management actions. Matson’s efforts to reward its shareholders through dividends and buybacks are also very appreciative.
Schneider National, currently carrying a Zacks Rank #2, is being aided by the strength in its Intermodal and Logistics segments. The Intermodal segment (revenues rose 17.3% in 2021) is benefiting from yield management, revenue per order and increased volumes, mainly in the Eastern rail network, while the Logistics unit (revenues surged 60.2% year over year) is thriving on the back of favorable constructive market conditions, increased spot mix and other factors.
SNDR has a sound liquidity position. Over the past 60 days, the stock has seen the Zacks Consensus Estimate for 2022 move 10.6% north. Shares of Schneider National have gained 9.2% in a year’s time.
Price and Consensus: SNDR
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Shutterstock
3 Stocks to Buy From a Prospering Transport Services Industry
Stocks in the Zacks Transportation-Services industry have an impressive run on the bourses, courtesy of the economic activity-led demand uptick. Despite supply-chain woes and the spread of the Omicron variant, the industry is benefiting from an improved freight demand scenario.
A substantial surge in manufactured goods fueled the transport service providers’ growth. The gradual recovery in the revenue scenario bodes well for the transport service providers with the likes of Expeditors International of Washington (EXPD - Free Report) , Schneider National (SNDR - Free Report) and Matson (MATX - Free Report) well-positioned to gain from the same.
About the Industry
The companies housed in the Zacks Transportation-Services industry offer logistics, leasing and maintenance services to transporters. Some industry players focus on the business of global logistics management, including international freight forwarding. The third-party logistics entities offer innovative supply-chain solutions. They also focus on services like product sourcing, warehousing and freight shipping. The companies have expertise in the fields of trucking, air and ocean transportation. Additionally, some of the players in this industry deliver domestic and international express delivery services. The well-being of the companies in this industrial cohort is directly proportional to the health of the economy. An uptick in manufactured and retail goods, favorable pricing and the betterment in global economic conditions bode well for the industry participants.
3 Key Investing Trends to Watch in the Transportation-Services Industry
Robust Freight Demand: Improving freight market conditions are lending a big boost to the transport-service providers. Agreed, that the Cass Freight shipments Index declined 10.8% month over month in January. But the decline was due to the omicron-led crisis. The overall improving trend is evident from the fact that the measure had improved in October, November and December on a month-over-month basis. With omicron cases subsiding, we believe that the January reading is an aberration, as the freight scenario is expected to improve in 2022. Further, strong growth in airfreight revenues aids freight forwarding companies like Expeditors. The increased usage of charters to meet customer needs following the cancellation of passenger flights (that usually carry freight as well as passenger luggage) is driving air-freight revenues. Such revenues are likely to soar at least in the near term as air-charter business is expected to maintain its uptrend.
Dividend Hikes Signal Financial Strength: With the resumption of economic activities, many companies including some transport service providers are reactivating their shareholder-friendly measures like increasing their respective dividend payouts, which underline their financial strength and confidence in the business. In January, Schneider National announced a 14.3% raise in its quarterly dividend. Also, the likes of Expeditors and Matson announced dividend hikes in 2021.
Oil Price May Increase in 2022 Hurting Bottom Line: The U.S. Energy Information Administration (EIA) in February 2022 increased its oil price forecast. The EIA in its current-month's short-term energy outlook stated that it expects the average Brent spot price to be $82.87 per barrel for the full year. This marks an increase from its January forecast wherein it had expected the average Brent spot price to be $74.95 per barrel for 2022. It projects the same to average $88.13 per barrel for the first quarter of 2022. This estimate is $9.50 per barrel or 12.1% higher than its previous prediction.
EIA’s hiked forecast for oil prices is unfavorable for the transport service providers and might dent bottom-line growth. This is because fuel expenses represent one of the highest input costs for these players.
Zacks Industry Rank Indicates Sunny Prospects
The Zacks Transportation - Services industry is a 27-stock group within the broader Zacks Transportation sector. The industry currently carries a Zacks Industry Rank #64, which places it in the top 26% of 250 plus Zacks industries.
The group’s Zacks Industry Rank, the average of the Zacks Rank of all member stocks, indicates bright near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry’s positioning in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence from this group’s earnings growth potential. Evidently, the industry’s earnings estimate for 2022 increased 24.2% year over year.
Before we present a few stocks that you may want to add to your portfolio, let’s look at the industry’s recent stock-market performance and its valuation picture.
Industry Lags S&P 500 and Sector
The Zacks Transportation-Services industry has underperformed the Zacks S&P 500 composite as well as the broader Transportation Sector over the past year.
The industry has declined 9.1% over this period against the S&P 500’s appreciation of 12.4%. The broader sector has dipped 0.9% during the same time frame.
One-Year Price Performance
Industry's Current Valuation
On the basis of trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), a commonly used multiple for valuing the Transportation-services stocks, the industry is currently trading at 13.85X compared with the S&P 500’s 14.11X. The value is also lower than the sector’s trailing 12-month EV/EBITDA of 14.87X.
Over the past five years, the industry has traded as high as 24.19X, as low as 11.01X and at the median of 16.62X
Enterprise Value-to-EBITDA Ratio (TTM)
3 Transport Services Stocks to Buy
Expeditors International of Washington: This Seattle, WA-based Expeditors is engaged in global logistics management, including international freight forwarding and consolidation for both air and ocean freight. Over the past 60 days, this presently #1 Ranked company has seen the Zacks Consensus Estimate for 2022 increase 7.11%. The stock has gained 9.4% in a year’s time.
Expeditors is being bolstered by the uptick in airfreight revenues. Revenues from the airfreight services unit increased 58.4% year over year in 2021. Efforts to reward its shareholders through dividends and buybacks are very encouraging as well.
Price and Consensus: EXPD
Matson, a Honolulu, Hawaii-based provider of ocean transportation and logistics services, currently sports a Zacks Rank #1. Over the past 60 days, MATX has seen the Zacks Consensus Estimate for 2022 move 86.22% north.
The stock has gained 49.2% in a year’s time on the back of factors like improved freight demand and cost-management actions. Matson’s efforts to reward its shareholders through dividends and buybacks are also very appreciative.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Price and Consensus: MATX
Schneider National, currently carrying a Zacks Rank #2, is being aided by the strength in its Intermodal and Logistics segments. The Intermodal segment (revenues rose 17.3% in 2021) is benefiting from yield management, revenue per order and increased volumes, mainly in the Eastern rail network, while the Logistics unit (revenues surged 60.2% year over year) is thriving on the back of favorable constructive market conditions, increased spot mix and other factors.
SNDR has a sound liquidity position. Over the past 60 days, the stock has seen the Zacks Consensus Estimate for 2022 move 10.6% north. Shares of Schneider National have gained 9.2% in a year’s time.
Price and Consensus: SNDR