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Zacks Industry Outlook Highlights Expeditors International of Washington, C.H. Robinson Worldwide and Matson
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For Immediate Release
Chicago, IL – October 20, 2022 – Today, Zacks Equity Research discusses Expeditors International of Washington (EXPD - Free Report) , C.H. Robinson Worldwide (CHRW - Free Report) and Matson (MATX - Free Report) .
The Zacks Transportation-Services industry is being hit by the inflation-induced extreme market volatility that characterized U.S. markets in the current year. Supply-chain woes and high-fuel costs are also denting the prospects of transport service providers.
However, despite this gloom, there are some positives like impressive freight demand as economic activities gain pace following the easing of COVID-related restrictions. Stocks like Expeditors International of Washington, C.H. Robinson Worldwide and Matson are well-positioned to capitalize on this healthy demand environment.
About the Industry
The companies housed in the Zacks Transportation-Services industry offer transporters logistics, leasing and maintenance services. Some industry players focus on the business of global logistics management, including international freight forwarding. Third-party logistics entities provide innovative supply-chain solutions. They also focus on services like product sourcing, warehousing and freight shipping.
The companies have expertise in trucking, air and ocean transportation. Additionally, some 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 improvement in global economic conditions bode well for the industry participants.
3 Trends Shaping the Future of the Transportation-Services Industry
Freight Demand Remains Impressive: Owing to the gradual recovery in economic activities, freight demand continues to be strong despite minor hiccups. This is supporting growth of the transport service providers. The Cass Freight shipments Index improved 4.8% year over year in September. The overall improving trend is evident from the fact that the measure has improved year over year in five (February, March, July, August and September) of the nine months reported so far this year.
Economic Uncertainties a Woe: To tame the sky-high inflation in the United States, the Fed adopted a hawkish stance. Per the latest available data, the Consumer Price Index (CPI) inflation for September 2022 was up 8.2% year over year. As a result of the higher-than-expected reading, the Fed, which has already raised its core interest rate 3% year-to-date, is likely to retain its interest-raising policy in its future meetings this year. Higher interest rates result in the cost of borrowing moving north. This escalates the chances of an economic slowdown. Risks associated with economic slowdown, geopolitical tensions and supply-chain woes are hurting the prospects of stocks belonging to this industrial cohort.
High Costs Hurting the Bottom Line: Operating expenses are on the rise, mainly due to increased fuel costs. Fuel expenses represent a key input cost for any transportation player. High oil price (up 48% in first-half 2022) is augmenting fuel costs. Even though oil price declined from its multi-year highs due to recession fears, it remains high.
Zacks Industry Rank Indicates Dull 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 #187, which places it in the bottom 25% of 250 plus Zacks industries.
The group’s Zacks Industry Rank, the average of the Zacks Rank of all member stocks, indicates dismal 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 bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential. Since Mar 31, 2022, the industry's earnings estimates for 2022 have decreased 6.3%.
Before we present a few stocks from the industry that you may want to consider, let’s take a look at the industry’s recent stock market performance and the valuation picture
Industry Lags S&P 500 and Sector
The Zacks Transportation-Services industry has underperformed the Zacks S&P 500 composite and the broader Transportation sector over the past year.
The industry has declined 27.8% over this period compared with the S&P 500's depreciation of 21.8% and the broader sector’s plunge of 21.9%.
Industry's Current Valuation
Based on the forward 12-month price-to-sales, a commonly used multiple for valuing the Transportation-services stocks, the industry is currently trading at 1.41X compared with the S&P 500's 3.06X. The value is also lower than the sector's trailing 12-month P/S of 1.43X.
Over the past five years, the industry has traded as high as 1.75X, as low as 1.29X and at the median of 1.41X.
3 Transport Services Stocks to Watch
Expeditors currently carries a Zacks Rank #3 (Hold). This Seattle, WA-based freight forwarder is being bolstered by strong air-freight revenues.
Expeditors has a highly impressive earnings track record. The bottom line surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 20.32%. The stock has witnessed a 3% upward revision of the Zacks Consensus Estimate for current-year earnings over the past 90 days.
C.H. Robinson Worldwide, currently carrying a Zacks Rank #3, operates as an asset-light logistics player. The improving freight scenario in the United States is aiding this Minnesota-based freight broker. Efforts to control costs also bode well. Measures to reward CHRW's shareholders instill further confidence in the stock.
C.H. Robinson has an impressive earnings track record. The bottom line surpassed the Zacks Consensus Estimate in three of the trailing four quarters (missing the mark in the remaining one), the average surprise being 24.18%. CHRW has witnessed the Zacks Consensus Estimate for 2022 earnings being revised 0.34% upward over the past 60 days.
Matson, a Honolulu, Hawaii-based provider of ocean transportation and logistics services, currently carries a Zacks Rank of 3. Over the past 60 days, MATX has seen the Zacks Consensus Estimate for 2022 move 2.91% north.
The stock is gaining from the improved freight demand scenario and cost-management actions. Matson's efforts to reward its shareholders through dividends and buybacks are also very appreciative.
Why Haven’t You Looked at Zacks' Top Stocks?
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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 Expeditors International of Washington, C.H. Robinson Worldwide and Matson
For Immediate Release
Chicago, IL – October 20, 2022 – Today, Zacks Equity Research discusses Expeditors International of Washington (EXPD - Free Report) , C.H. Robinson Worldwide (CHRW - Free Report) and Matson (MATX - Free Report) .
Industry: Transportation - Services
Link: https://www.zacks.com/commentary/1993580/3-transport-services-stocks-to-watch-despite-industry-woes
The Zacks Transportation-Services industry is being hit by the inflation-induced extreme market volatility that characterized U.S. markets in the current year. Supply-chain woes and high-fuel costs are also denting the prospects of transport service providers.
However, despite this gloom, there are some positives like impressive freight demand as economic activities gain pace following the easing of COVID-related restrictions. Stocks like Expeditors International of Washington, C.H. Robinson Worldwide and Matson are well-positioned to capitalize on this healthy demand environment.
About the Industry
The companies housed in the Zacks Transportation-Services industry offer transporters logistics, leasing and maintenance services. Some industry players focus on the business of global logistics management, including international freight forwarding. Third-party logistics entities provide innovative supply-chain solutions. They also focus on services like product sourcing, warehousing and freight shipping.
The companies have expertise in trucking, air and ocean transportation. Additionally, some 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 improvement in global economic conditions bode well for the industry participants.
3 Trends Shaping the Future of the Transportation-Services Industry
Freight Demand Remains Impressive: Owing to the gradual recovery in economic activities, freight demand continues to be strong despite minor hiccups. This is supporting growth of the transport service providers. The Cass Freight shipments Index improved 4.8% year over year in September. The overall improving trend is evident from the fact that the measure has improved year over year in five (February, March, July, August and September) of the nine months reported so far this year.
Economic Uncertainties a Woe: To tame the sky-high inflation in the United States, the Fed adopted a hawkish stance. Per the latest available data, the Consumer Price Index (CPI) inflation for September 2022 was up 8.2% year over year. As a result of the higher-than-expected reading, the Fed, which has already raised its core interest rate 3% year-to-date, is likely to retain its interest-raising policy in its future meetings this year. Higher interest rates result in the cost of borrowing moving north. This escalates the chances of an economic slowdown. Risks associated with economic slowdown, geopolitical tensions and supply-chain woes are hurting the prospects of stocks belonging to this industrial cohort.
High Costs Hurting the Bottom Line: Operating expenses are on the rise, mainly due to increased fuel costs. Fuel expenses represent a key input cost for any transportation player. High oil price (up 48% in first-half 2022) is augmenting fuel costs. Even though oil price declined from its multi-year highs due to recession fears, it remains high.
Zacks Industry Rank Indicates Dull 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 #187, which places it in the bottom 25% of 250 plus Zacks industries.
The group’s Zacks Industry Rank, the average of the Zacks Rank of all member stocks, indicates dismal 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 bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential. Since Mar 31, 2022, the industry's earnings estimates for 2022 have decreased 6.3%.
Before we present a few stocks from the industry that you may want to consider, let’s take a look at the industry’s recent stock market performance and the valuation picture
Industry Lags S&P 500 and Sector
The Zacks Transportation-Services industry has underperformed the Zacks S&P 500 composite and the broader Transportation sector over the past year.
The industry has declined 27.8% over this period compared with the S&P 500's depreciation of 21.8% and the broader sector’s plunge of 21.9%.
Industry's Current Valuation
Based on the forward 12-month price-to-sales, a commonly used multiple for valuing the Transportation-services stocks, the industry is currently trading at 1.41X compared with the S&P 500's 3.06X. The value is also lower than the sector's trailing 12-month P/S of 1.43X.
Over the past five years, the industry has traded as high as 1.75X, as low as 1.29X and at the median of 1.41X.
3 Transport Services Stocks to Watch
Expeditors currently carries a Zacks Rank #3 (Hold). This Seattle, WA-based freight forwarder is being bolstered by strong air-freight revenues.
Expeditors has a highly impressive earnings track record. The bottom line surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 20.32%. The stock has witnessed a 3% upward revision of the Zacks Consensus Estimate for current-year earnings over the past 90 days.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here
C.H. Robinson Worldwide, currently carrying a Zacks Rank #3, operates as an asset-light logistics player. The improving freight scenario in the United States is aiding this Minnesota-based freight broker. Efforts to control costs also bode well. Measures to reward CHRW's shareholders instill further confidence in the stock.
C.H. Robinson has an impressive earnings track record. The bottom line surpassed the Zacks Consensus Estimate in three of the trailing four quarters (missing the mark in the remaining one), the average surprise being 24.18%. CHRW has witnessed the Zacks Consensus Estimate for 2022 earnings being revised 0.34% upward over the past 60 days.
Matson, a Honolulu, Hawaii-based provider of ocean transportation and logistics services, currently carries a Zacks Rank of 3. Over the past 60 days, MATX has seen the Zacks Consensus Estimate for 2022 move 2.91% north.
The stock is gaining from the improved freight demand scenario and cost-management actions. Matson's efforts to reward its shareholders through dividends and buybacks are also very appreciative.
Why Haven’t You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
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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.