The Zacks Transportation Sector came under the spotlight a few weeks back when FedEx (FDX - Free Report) withdrew its FY23 earnings forecast, citing a volatile operating environment.
The news spooked many investors, with FDX shares losing more than 20% in value the following trading period.
Obviously, the announcement has potentially enormous ramifications, as FedEx's operations span worldwide, providing us with a decent feel of consumer sentiment.
However, many of the issues FedEx speaks on seem company-specific, not necessarily a reflection of the Transportation Sector as a whole.
For example, a shakeup within management following long-time CEO Fred Smith’s departure and lingering issues from a worse-than-expected integration of TNT Express have been thorns on the company’s side.
Further, the slashed guidance was given just in June, the same month Fred Smith stepped down.
On the contrary, in its most recent earnings report, United Parcel Service (UPS - Free Report) reported a notably strong quarter and even reaffirmed its 2022 guidance in the face of challenging business conditions.
While there are, no doubt, macroeconomic forces at play negatively impacting the Transportation Sector, it’s vital to know that operating issues have been haunting FedEx for some time now.
In fact, a part of the Zacks Transportation Sector, the Zacks Transportation – Shipping Industry, is chugging along just fine in 2022, up more than 20% vs. the S&P 500’s nearly 22% decline. This is illustrated in the chart below.
For those looking to tap into the industry, three highly-ranked stocks in the realm – International Seaways (INSW - Free Report) , SFL Corp. (SFL - Free Report) , and Euroseas Ltd. (ESEA - Free Report) – would all provide precisely that.
Below is a chart illustrating the share performance of all three companies YTD with the S&P 500 blended in as a benchmark.
Let’s take a deeper dive into each one.
Euroseas Ltd.
Euroseas operates in the dry cargo, dry bulk, and container shipping markets. Analysts have been bullish across several timeframes over the last 60 days, helping land the stock into a favorable Zacks Rank #1 (Strong Buy).
Euroseas’ growth prospects are stellar; earnings are forecasted to climb a triple-digit 150% Y/Y in FY22 and a further double-digit 31% in FY23.
Top-line growth is also very apparent; the FY22 revenue estimate of $196 million is double what it raked in during FY21 ($98 million).
ESEA rewards its shareholders handsomely – the company’s annual dividend yield was raised to 9.5% in 2022, paired with a sustainable 17% payout ratio.
And for the cherry on top, shares are cheap; the company’s 0.8X forward price-to-sales ratio reflects a steep 47% discount relative to its Transportation Sector.
SFL Corp.
SFL Corp. owns and operates vessels and offshore-related assets primarily in Bermuda, Cyprus, Malta, Liberia, Norway, the United Kingdom, and the Marshall Islands. The company’s near-term earnings outlook has turned visibly bright over the last several months.
Like ESEA, SFL Corp. sports a mighty strong dividend; SFL's annual dividend yields 9.7% but with a payout ratio sitting higher at 73% of earnings.
Further, SFL has a strong earnings track record, exceeding revenue and earnings estimates in its last four quarters. Below is a chart illustrating the company’s revenue on a quarterly basis.
International Seaways
International Seaways, Inc. is a tanker company providing energy transportation services for crude oil and petroleum products. Analysts have had a bullish stance on the company’s near-term earnings outlook as of late.
INSW’s annual dividend yield comes in at 1.4%, notably lower than its Zacks Sector. Still, the company has upped its payout twice over the last five years.
In addition, INSW’s growth prospects are inspiring; earnings are forecasted to skyrocket a triple-digit 300% in FY22 and a further 34% in FY23. That’s paired with projections of 150% top-line growth in FY22 and 2% in FY23.
Bottom Line
While FedEx’s (FDX - Free Report) announcement surely spooked the world, the issues appear to be more company-specific than representative of the entire Transportation Sector.
As mentioned, United Parcel Service (UPS - Free Report) had a notably strong quarter, reaffirming its FY22 guidance.
For those looking to tap into the relative strength the Zacks Transportation – Shipping Industry has been displaying, all three stocks above - International Seaways (INSW - Free Report) , SFL Corp. (SFL - Free Report) , and Euroseas Ltd. (ESEA - Free Report) – would all provide precisely that.
Further, all three sport a Zacks Rank #2 (Buy) or Zacks Rank #1 (Strong Buy), telling us that their near-term earnings outlook is fruitful.
The strong Zacks Rank paired with the companies’ substantial payouts is a beautiful combination.
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The Zacks Transportation Sector came under the spotlight a few weeks back when FedEx (FDX - Free Report) withdrew its FY23 earnings forecast, citing a volatile operating environment.
The news spooked many investors, with FDX shares losing more than 20% in value the following trading period.
Obviously, the announcement has potentially enormous ramifications, as FedEx's operations span worldwide, providing us with a decent feel of consumer sentiment.
However, many of the issues FedEx speaks on seem company-specific, not necessarily a reflection of the Transportation Sector as a whole.
For example, a shakeup within management following long-time CEO Fred Smith’s departure and lingering issues from a worse-than-expected integration of TNT Express have been thorns on the company’s side.
Further, the slashed guidance was given just in June, the same month Fred Smith stepped down.
On the contrary, in its most recent earnings report, United Parcel Service (UPS - Free Report) reported a notably strong quarter and even reaffirmed its 2022 guidance in the face of challenging business conditions.
While there are, no doubt, macroeconomic forces at play negatively impacting the Transportation Sector, it’s vital to know that operating issues have been haunting FedEx for some time now.
In fact, a part of the Zacks Transportation Sector, the Zacks Transportation – Shipping Industry, is chugging along just fine in 2022, up more than 20% vs. the S&P 500’s nearly 22% decline. This is illustrated in the chart below.
For those looking to tap into the industry, three highly-ranked stocks in the realm – International Seaways (INSW - Free Report) , SFL Corp. (SFL - Free Report) , and Euroseas Ltd. (ESEA - Free Report) – would all provide precisely that.
Below is a chart illustrating the share performance of all three companies YTD with the S&P 500 blended in as a benchmark.
Let’s take a deeper dive into each one.
Euroseas Ltd.
Euroseas operates in the dry cargo, dry bulk, and container shipping markets. Analysts have been bullish across several timeframes over the last 60 days, helping land the stock into a favorable Zacks Rank #1 (Strong Buy).
Euroseas’ growth prospects are stellar; earnings are forecasted to climb a triple-digit 150% Y/Y in FY22 and a further double-digit 31% in FY23.
Top-line growth is also very apparent; the FY22 revenue estimate of $196 million is double what it raked in during FY21 ($98 million).
ESEA rewards its shareholders handsomely – the company’s annual dividend yield was raised to 9.5% in 2022, paired with a sustainable 17% payout ratio.
And for the cherry on top, shares are cheap; the company’s 0.8X forward price-to-sales ratio reflects a steep 47% discount relative to its Transportation Sector.
SFL Corp.
SFL Corp. owns and operates vessels and offshore-related assets primarily in Bermuda, Cyprus, Malta, Liberia, Norway, the United Kingdom, and the Marshall Islands. The company’s near-term earnings outlook has turned visibly bright over the last several months.
Like ESEA, SFL Corp. sports a mighty strong dividend; SFL's annual dividend yields 9.7% but with a payout ratio sitting higher at 73% of earnings.
Further, SFL has a strong earnings track record, exceeding revenue and earnings estimates in its last four quarters. Below is a chart illustrating the company’s revenue on a quarterly basis.
International Seaways
International Seaways, Inc. is a tanker company providing energy transportation services for crude oil and petroleum products. Analysts have had a bullish stance on the company’s near-term earnings outlook as of late.
INSW’s annual dividend yield comes in at 1.4%, notably lower than its Zacks Sector. Still, the company has upped its payout twice over the last five years.
In addition, INSW’s growth prospects are inspiring; earnings are forecasted to skyrocket a triple-digit 300% in FY22 and a further 34% in FY23. That’s paired with projections of 150% top-line growth in FY22 and 2% in FY23.
Bottom Line
While FedEx’s (FDX - Free Report) announcement surely spooked the world, the issues appear to be more company-specific than representative of the entire Transportation Sector.
As mentioned, United Parcel Service (UPS - Free Report) had a notably strong quarter, reaffirming its FY22 guidance.
For those looking to tap into the relative strength the Zacks Transportation – Shipping Industry has been displaying, all three stocks above - International Seaways (INSW - Free Report) , SFL Corp. (SFL - Free Report) , and Euroseas Ltd. (ESEA - Free Report) – would all provide precisely that.
Further, all three sport a Zacks Rank #2 (Buy) or Zacks Rank #1 (Strong Buy), telling us that their near-term earnings outlook is fruitful.
The strong Zacks Rank paired with the companies’ substantial payouts is a beautiful combination.
4 Oil Stocks with Massive Upsides
Global demand for oil is through the roof... and oil producers are struggling to keep up. So even though oil prices are well off their recent highs, you can expect big profits from the companies that supply the world with "black gold."
Zacks Investment Research has just released an urgent special report to help you bank on this trend.
In Oil Market on Fire, you'll discover 4 unexpected oil and gas stocks positioned for big gains in the coming weeks and months. You don't want to miss these recommendations.
Download your free report now to see them.
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