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Zacks Industry Outlook Highlights: Schneider National, Matson, Hub Group, Expeditors International of Washington and C.H. Robinson Worldwide
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For Immediate Release
Chicago, IL – October 26, 2021 – Today, Zacks Equity Research discusses Transport Services, including Schneider National, Inc. (SNDR - Free Report) , Matson, Inc. (MATX - Free Report) , Hub Group, Inc. (HUBG - Free Report) , Expeditors International of Washington, Inc. (EXPD - Free Report) and C.H. Robinson Worldwide, Inc. (CHRW - Free Report) .
The rapid spread of the highly contagious Delta variant of the coronavirus in many places across the globe including the United States threatened to derail the economic uptick witnessed at the outset of the current year. The Zacks Transportation-Services industry is also not spared of the pandemic ills with supply-chain disruptions induced by the rapid spread of the Delta stain stinging the industry.
However, much to everyone’s relief, the Delta-mutant threat in the United States is receding with the number of cases coming down. Besides, increased vaccination contributed to the uptick in economic activities. A substantial surge in manufactured goods fueled the transport service providers’ growth.
The gradual recovery in the freight scenario bodes well for the transport service providers with the likes of Schneider National, Matson and Hub Group well-positioned to gain from the same.
About the Industry
The companies belonging to 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 companies provide 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 improving global economic conditions bode well for the industry participants.
3 Key Investing Trends to Watch in the Transportation-Services Industry
Recovering Freight Scene Bodes Well: The supply-chain woes due to the Delta-variant spread dampened the freight scene in the United States. Evidently, the Cass Freight shipments Index declined 4.2% and 3.1% month over month in June and July, respectively. However, the same increased 4.8% in August from the July levels, highlighting the improving scenario.
Further, strong growth in airfreight revenues is a big boost to freight forwarding companies like Expeditors International of Washington . 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.
Higher Oil Prices Hurting Bottom Line: The rise in fuel price per gallon with oil prices moving north (oil price was up 2.1% in the third quarter from the second-quarter levels) is not a welcoming development for the transportation service providers as far as their bottom lines are concerned. This is because fuel expenses represent one of the largest input costs for these companies.
The oil prices will continue to shoot up as reflected in the U.S. Energy Information Administration’s (EIA) decision to increase forecasts for oil prices during 2021 and 2022. The EIA in its October short-term energy outlook stated that it expects the average Brent spot price to be $71.38 per barrel for the current year.
This marks a significant rise from the EIA’s September forecast when it had expected the average Brent spot price at $68.61 per barrel for 2021. It expects the same to average $81 per barrel during the December quarter. This expectation is $10 per barrel higher than its previous prediction.
The upped forecast for oil prices by the EIA is a further indicator that the transportation service providers will struggle in the near term as well on account of elevated fuel prices.
Uptick in Shareholder-Friendly Measures: With the resumption of economic activities, many companies including some transport service providers are reactivating their shareholder-friendly measures like dividend payouts and buybacks, which underline their financial strength and confidence in the business. Evidently, in June, Matson’s board cleared a 30.4% hike in its quarterly dividend, thus taking the total to 30 cents per share.
It also approved a share repurchase program of three million shares (approximately 7% of its outstanding common shares). Also, after a temporary pause on its share buyback plans to address the coronavirus situation, C.H. RobinsonWorldwide resumed the same in the fourth quarter of 2020.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Transportation-Services industry is a 28-stock group within the broader Zacks Transportation sector. The industry currently carries a Zacks Industry Rank #104, which places it in the top 41% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, suggests sunny 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 position in the top 50% of the Zacks-ranked industries is a result of an optimistic 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. On a year-over-year basis, the industry’s earnings estimate for 2021 has been revised 34.2% upward.
Considering the encouraging dynamics of the industry, we will present a few stocks that you may want to consider for your portfolio. But it’s worth taking a look at the industry’s shareholder returns and its current valuation first.
Industry Outperforms Sector but Lags S&P 500
The Zacks Transportation-Services industry has underperformed the Zacks S&P 500 composite but outperformed the broader Transportation sector over the past year.
The industry has rallied 22.3% over this period compared with the S&P 500’s appreciation of 35%. The broader sector has gained 20.4% in a year’s time.
Industry's Current Valuation
On the basis of its trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), which is a commonly used multiple for valuing Transportation-services stocks, the industry is currently trading at 21.56X compared with the S&P 500’s 16.24X. The value is also higher than the sector’s trailing 12-month EV/EBITDA of 18.87X.
Over the past five years, the industry has traded as high as 29.63X, as low as 10.90X and at the median of 17.50X.
3 Top Transport Services Stocks to Buy Now
Matson: This Honolulu, Hawaii-based provider of ocean transportation and logistics services currently sports a Zacks Rank #1 (Strong Buy). Over the past 60 days, the stock has seen the Zacks Consensus Estimate for 2021 move 38.7% north.
The stock has gained 24.5% over the past six months on the back of improved freight demand, shareholder-friendly attitude and cost-management actions. Based on the improving business conditions, we expect the company to have performed well in the third quarter of 2021. Detailed results will be out on Nov 3.
Schneider National: This Brown County, WI-based transportation and logistics services company currently carries a Zacks Rank #2 (Buy). It is being aided by strong performances of the Intermodal and Logistics units. The Intermodal segment is benefiting from yield management and increased volumes while the Logistics unit is thriving on the back of favorable constructive market conditions and other factors.
Over the past 60 days, the stock has seen the Zacks Consensus Estimate for 2021 move 2.1% north.Driven by the above-mentioned tailwinds, the stock has gained 4.4% in the past six months. Based on the improving market conditions, we expect the company to have performed well in the third quarter of 2021. Detailed results will be out on Oct 28.
Hub Group: The Oak Brook, Illinois-based provider of transportation and logistics management solutions currently carries a Zacks Rank of 2. The company is being aided by the gradual improvement in the freight market conditions. Its strong customer base and growth by acquisition strategy also bode well.
Evidently, Hub Group acquired Choptank Transport in October 2021, thereby expanding its operations pertaining to supply-chain solutions. Driven by upbeat intermodal, logistics and truck brokerage revenues, we expect the company to have performed well in the third quarter of 2021. Detailed results will be out on Oct 28.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights: Schneider National, Matson, Hub Group, Expeditors International of Washington and C.H. Robinson Worldwide
For Immediate Release
Chicago, IL – October 26, 2021 – Today, Zacks Equity Research discusses Transport Services, including Schneider National, Inc. (SNDR - Free Report) , Matson, Inc. (MATX - Free Report) , Hub Group, Inc. (HUBG - Free Report) , Expeditors International of Washington, Inc. (EXPD - Free Report) and C.H. Robinson Worldwide, Inc. (CHRW - Free Report) .
Link: https://www.zacks.com/commentary/1815732/rosy-prospects-for-transport-services-industry-3-solid-picks
The rapid spread of the highly contagious Delta variant of the coronavirus in many places across the globe including the United States threatened to derail the economic uptick witnessed at the outset of the current year.
The Zacks Transportation-Services industry is also not spared of the pandemic ills with supply-chain disruptions induced by the rapid spread of the Delta stain stinging the industry.
However, much to everyone’s relief, the Delta-mutant threat in the United States is receding with the number of cases coming down. Besides, increased vaccination contributed to the uptick in economic activities. A substantial surge in manufactured goods fueled the transport service providers’ growth.
The gradual recovery in the freight scenario bodes well for the transport service providers with the likes of Schneider National, Matson and Hub Group well-positioned to gain from the same.
About the Industry
The companies belonging to 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 companies provide 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 improving global economic conditions bode well for the industry participants.
3 Key Investing Trends to Watch in the Transportation-Services Industry
Recovering Freight Scene Bodes Well: The supply-chain woes due to the Delta-variant spread dampened the freight scene in the United States. Evidently, the Cass Freight shipments Index declined 4.2% and 3.1% month over month in June and July, respectively. However, the same increased 4.8% in August from the July levels, highlighting the improving scenario.
Further, strong growth in airfreight revenues is a big boost to freight forwarding companies like Expeditors International of Washington . 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.
Higher Oil Prices Hurting Bottom Line: The rise in fuel price per gallon with oil prices moving north (oil price was up 2.1% in the third quarter from the second-quarter levels) is not a welcoming development for the transportation service providers as far as their bottom lines are concerned. This is because fuel expenses represent one of the largest input costs for these companies.
The oil prices will continue to shoot up as reflected in the U.S. Energy Information Administration’s (EIA) decision to increase forecasts for oil prices during 2021 and 2022. The EIA in its October short-term energy outlook stated that it expects the average Brent spot price to be $71.38 per barrel for the current year.
This marks a significant rise from the EIA’s September forecast when it had expected the average Brent spot price at $68.61 per barrel for 2021. It expects the same to average $81 per barrel during the December quarter. This expectation is $10 per barrel higher than its previous prediction.
The upped forecast for oil prices by the EIA is a further indicator that the transportation service providers will struggle in the near term as well on account of elevated fuel prices.
Uptick in Shareholder-Friendly Measures: With the resumption of economic activities, many companies including some transport service providers are reactivating their shareholder-friendly measures like dividend payouts and buybacks, which underline their financial strength and confidence in the business. Evidently, in June, Matson’s board cleared a 30.4% hike in its quarterly dividend, thus taking the total to 30 cents per share.
It also approved a share repurchase program of three million shares (approximately 7% of its outstanding common shares). Also, after a temporary pause on its share buyback plans to address the coronavirus situation, C.H. Robinson Worldwide resumed the same in the fourth quarter of 2020.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Transportation-Services industry is a 28-stock group within the broader Zacks Transportation sector. The industry currently carries a Zacks Industry Rank #104, which places it in the top 41% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all member stocks, suggests sunny 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 position in the top 50% of the Zacks-ranked industries is a result of an optimistic 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. On a year-over-year basis, the industry’s earnings estimate for 2021 has been revised 34.2% upward.
Considering the encouraging dynamics of the industry, we will present a few stocks that you may want to consider for your portfolio. But it’s worth taking a look at the industry’s shareholder returns and its current valuation first.
Industry Outperforms Sector but Lags S&P 500
The Zacks Transportation-Services industry has underperformed the Zacks S&P 500 composite but outperformed the broader Transportation sector over the past year.
The industry has rallied 22.3% over this period compared with the S&P 500’s appreciation of 35%. The broader sector has gained 20.4% in a year’s time.
Industry's Current Valuation
On the basis of its trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), which is a commonly used multiple for valuing Transportation-services stocks, the industry is currently trading at 21.56X compared with the S&P 500’s 16.24X. The value is also higher than the sector’s trailing 12-month EV/EBITDA of 18.87X.
Over the past five years, the industry has traded as high as 29.63X, as low as 10.90X and at the median of 17.50X.
3 Top Transport Services Stocks to Buy Now
Matson: This Honolulu, Hawaii-based provider of ocean transportation and logistics services currently sports a Zacks Rank #1 (Strong Buy). Over the past 60 days, the stock has seen the Zacks Consensus Estimate for 2021 move 38.7% north.
The stock has gained 24.5% over the past six months on the back of improved freight demand, shareholder-friendly attitude and cost-management actions. Based on the improving business conditions, we expect the company to have performed well in the third quarter of 2021. Detailed results will be out on Nov 3.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Schneider National: This Brown County, WI-based transportation and logistics services company currently carries a Zacks Rank #2 (Buy). It is being aided by strong performances of the Intermodal and Logistics units. The Intermodal segment is benefiting from yield management and increased volumes while the Logistics unit is thriving on the back of favorable constructive market conditions and other factors.
Over the past 60 days, the stock has seen the Zacks Consensus Estimate for 2021 move 2.1% north.Driven by the above-mentioned tailwinds, the stock has gained 4.4% in the past six months. Based on the improving market conditions, we expect the company to have performed well in the third quarter of 2021. Detailed results will be out on Oct 28.
Hub Group: The Oak Brook, Illinois-based provider of transportation and logistics management solutions currently carries a Zacks Rank of 2. The company is being aided by the gradual improvement in the freight market conditions. Its strong customer base and growth by acquisition strategy also bode well.
Evidently, Hub Group acquired Choptank Transport in October 2021, thereby expanding its operations pertaining to supply-chain solutions. Driven by upbeat intermodal, logistics and truck brokerage revenues, we expect the company to have performed well in the third quarter of 2021. Detailed results will be out on Oct 28.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.