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.
Will the Bull Run Continue for Transport Services Industry?
Read MoreHide Full Article
The diversified transportation sector, which includes airline operators, railroads, truckers and shippers, to name a few, performed well in the first half of 2018. Strong U.S. economic fundamentals and substantial surge in manufactured and retail goods are anticipated to fuel the transportation sector’s growth. Consequently, the companies offering equipment financing and leasing, logistics and supply chain management services to transporters have also rebounded in 2018.
Growth Inducing Polices
As the U.S. economy continues to grow, demand for carriage is also increasing and this momentum is anticipated to sustain in the rest of 2018. The two pro-growth agendas of President Trump, namely, significant cut in corporate tax and deregulation are major catalysts to the transportation sector.
Massive reduction in corporate taxes from 35% to 21% has brought corporate tax rate to its lowest level in 78 years. A large part of transporters book much of their revenues within the United States. Consequently, a significant reduction in corporate tax rate brone by these companies would be immediately accretive to cash flow.
Strong U.S. Economic Fundamentals
U.S. GDP grew at 4.2% in the second-quarter of 2018, marking its highest gain since the third quarter of 2014 and the third-best growth rate since the Great Recession of 2008-2009. In the second quarter, consumer spending increased 4%, business investment grew 7.3% and government spending rose 3.5%.
In the first half of 2018, the U.S. GDP grew at 3.2%, better than the Trump administration’s target level of 3%. Moreover, the unemployment of 3.7% is at its lowest since December 1969. Average wage rate increased 0.5% in August, the fastest pace since January. Despite wage growth, the core PCE index (excluding food and energy) - Fed’s preferred gauge of inflation measure - remained steady at 2%.
Additionally, both manufacturing and services sectors are growing at steady pace and consumer confidence is at its peak. Further, U.S. factory made goods in August rose 2.3%, marking its highest gain since September 2017.
Fed Raises GDP and Job Estimates
On Sep 26, the Fed raised forecast for 2018 and 2019 GDP growth from the 2.8% and 2.4% stated in June to 3.1% and 2.5%, respectively. Although the Fed raised its unemployment rate projection for 2018 from 3.6% to 3.7%, it is still lower than the current rate of 3.9%.
Projections for 2019 and 2020 remained unchanged at 3.5% while the first estimate for unemployment rate in 2021 is pegged at 3.7%. This indicates that the U.S. labor market will maintain near full employment levels over 2018-2021.
Performance of Major Transport Services Providers
Year to date, stock price of six major transport service providers, Matson Inc. (MATX - Free Report) , GATX Corp. (GATX - Free Report) , Westinghouse Air Brake Technologies Corp. (WAB - Free Report) , The Greenbrier Companies Inc. (GBX - Free Report) , XPO Logistics Inc. (XPO - Free Report) and Fly Leasing Ltd. outperformed the broad market S&P 500 index.
Bottom Line
The transportation sector seems to be positioned well not only in the near term but also in the long haul due to robust freight demand on the back of a buoyant economy. Consequently, growth potential of transportation services stocks is also bright.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
Image: Bigstock
Will the Bull Run Continue for Transport Services Industry?
The diversified transportation sector, which includes airline operators, railroads, truckers and shippers, to name a few, performed well in the first half of 2018. Strong U.S. economic fundamentals and substantial surge in manufactured and retail goods are anticipated to fuel the transportation sector’s growth. Consequently, the companies offering equipment financing and leasing, logistics and supply chain management services to transporters have also rebounded in 2018.
Growth Inducing Polices
As the U.S. economy continues to grow, demand for carriage is also increasing and this momentum is anticipated to sustain in the rest of 2018. The two pro-growth agendas of President Trump, namely, significant cut in corporate tax and deregulation are major catalysts to the transportation sector.
Massive reduction in corporate taxes from 35% to 21% has brought corporate tax rate to its lowest level in 78 years. A large part of transporters book much of their revenues within the United States. Consequently, a significant reduction in corporate tax rate brone by these companies would be immediately accretive to cash flow.
Strong U.S. Economic Fundamentals
U.S. GDP grew at 4.2% in the second-quarter of 2018, marking its highest gain since the third quarter of 2014 and the third-best growth rate since the Great Recession of 2008-2009. In the second quarter, consumer spending increased 4%, business investment grew 7.3% and government spending rose 3.5%.
In the first half of 2018, the U.S. GDP grew at 3.2%, better than the Trump administration’s target level of 3%. Moreover, the unemployment of 3.7% is at its lowest since December 1969. Average wage rate increased 0.5% in August, the fastest pace since January. Despite wage growth, the core PCE index (excluding food and energy) - Fed’s preferred gauge of inflation measure - remained steady at 2%.
Additionally, both manufacturing and services sectors are growing at steady pace and consumer confidence is at its peak. Further, U.S. factory made goods in August rose 2.3%, marking its highest gain since September 2017.
Fed Raises GDP and Job Estimates
On Sep 26, the Fed raised forecast for 2018 and 2019 GDP growth from the 2.8% and 2.4% stated in June to 3.1% and 2.5%, respectively. Although the Fed raised its unemployment rate projection for 2018 from 3.6% to 3.7%, it is still lower than the current rate of 3.9%.
Projections for 2019 and 2020 remained unchanged at 3.5% while the first estimate for unemployment rate in 2021 is pegged at 3.7%. This indicates that the U.S. labor market will maintain near full employment levels over 2018-2021.
Performance of Major Transport Services Providers
Year to date, stock price of six major transport service providers, Matson Inc. (MATX - Free Report) , GATX Corp. (GATX - Free Report) , Westinghouse Air Brake Technologies Corp. (WAB - Free Report) , The Greenbrier Companies Inc. (GBX - Free Report) , XPO Logistics Inc. (XPO - Free Report) and Fly Leasing Ltd. outperformed the broad market S&P 500 index.
Bottom Line
The transportation sector seems to be positioned well not only in the near term but also in the long haul due to robust freight demand on the back of a buoyant economy. Consequently, growth potential of transportation services stocks is also bright.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>