Written by Sean Sechler
October 21, 2021
From delivery truck drivers to shipping train conductors, it’s fair to say that companies in the transportation sector are going to play a critical role in dealing with those supply chain issues and helping the economy get back to normal. Keep in mind that many of these companies are also facing weak year-over-year comparisons given how big of a business drop-off they saw in 2020 with pandemic-related disruptions, which means they could provide some big earnings beats to wrap up the year.
If you are interested in gaining exposure to some of the top names in the sector with upside, here are 3 transportation stocks that could deliver big gains:
Adding a position in one of the top railroad companies in the country makes a lot of sense at this time, as these businesses tend to be closely tied to economic growth. There’s also a lot to like about how rail transportation offers cost advantages over trucking due to more fuel efficiency, which is particularly important given how oil prices have been rallying. Those are a few reasons why CSX Corporation stock is poised to outperform, as the company operates a U.S. rail network of roughly 25,000 miles and transports a variety of different raw materials and finished goods.
The company just reported a Q3 EPS beat and saw its revenue increase by 24% year-over-year to reach $3.29 billion, which is a good sign that all of its business lines are recovering nicely. It’s also worth mentioning that CSX acquired Quality Carriers in July, which is the largest provider of bulk liquid chemicals transportation in North America and a move that further diversifies the company’s business model. Finally, this stock is a solid option in the transportation industry given how a large portion of its railcar volume comes from consumer goods, which means CSX will benefit from plenty of business over the next quarter during the holiday season.
If you’re interested in a quality transportation stock that is trading at a deep discount, look no further than FedEx Corp. Shares of the leading global provider of transportation, e-commerce, and related services have been taken to the woodshed after the company reported disappointing earnings last quarter, which could present a nice buying opportunity for value-oriented investors. While the company’s management recently warned investors that factors like rising labor costs could impact earnings, FedEx is still a blue-chip name that should be able to deliver strong returns over the long term. The labor shortage should also just be a temporary factor, which means that the recent weakness could be an overreaction.
Keep in mind that trends like rising e-commerce volumes will translate to strong top-line growth for the company over the years, and with free return shipping becoming the new normal among retailers it’s safe to say that FedEx will have plenty of work going forward. FedEx also announced that it is increasing its rates in 2022, which should boost margins and help to combat some of the near-term headwinds the company is dealing with. Finally, the company recently boosted its dividend payout by 15%, which should give investors additional confidence in adding shares.
Marine shipping is a very important area of the transportation sector, yet many of the companies in the industry don’t receive a lot of attention. That shouldn’t steer you away from a company like Matson, which is experiencing explosive growth and has been benefitting from higher shipping rates during the pandemic. Honolulu-headquartered Matson operates through two segments, ocean transportation and logistics, and provides freight transportation services across the Pacific to places like Hawaii, Alaska, Guam, Micronesia, along with expedited services from China to Southern California.
The company’s Q2 results were quite impressive, as Matson reported a revenue increase of 67% year-over-year to $875 million along with a massive net income jump of 395% to $162.5 million. The company should continue benefitting from elevated demand as the global economy gets back to normal, and it's worth mentioning that Matson’s business in China is booming at the moment, another reason to consider adding shares. The stock has rallied over 45% year-to-date and could certainly continue to deliver big gains for investors interested in transports.Before you consider CSX, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. MarketBeat has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and CSX wasn't on the list.
While CSX currently has a "Moderate Buy" rating among analysts, top-rated analysts believe these five stocks are better buys.
View The Five Stocks Here
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