Things are constantly changing in the stock market, including which sectors are showing relative strength and helping the market tick upwards. While technology stocks have been roaring up higher for months, new economic data such as falling jobless claims and a slowdown in the number of COVID-19 cases in many states are adding optimism to the areas of the market that have been lagging behind. We’ve already seen some promising signs in the transportation sector, and there are several companies that look like great buys at this time.
When you think of the transportation industry and how it relates to the economy, it’s oftentimes a sign of economic strength when the sector is rallying. The pandemic was first considered to be terrible news for transportation companies thanks to the threat of supply chain disruptions and travel restrictions. However, there are some transportation stocks that are showing strength and have a lot of upside should the economy rebound quicker than anticipated. We’ve put together a list of 3 transportation stocks to buy below so that you can consider hitching a ride with some of the best companies in the sector.
This well-known air freight and logistics company looks extremely promising as it is currently hitting 52-week highs. FedEx is a company that has seen a revival during the pandemic as the demand for e-commerce and home deliveries has never been higher. Shares are hitting highs not seen since May of 2019 and look ready to continue heading higher. Although some of the industrial production that affects revenue for the company has slowed down, FedEx was able to report very strong Q2 earnings. Last year, the company invested a ton of money into its infrastructure in order to keep up with the demand for e-commerce. It appears that the investment is paying off for FedEx shareholders.
FedEx reported a huge beat on Q2 EPS of $2.53 per share versus the consensus estimate of $1.42 per share. The stock offers a dividend yield of 1.42% and it is up over 15% in August. You also have to like the prospects of owning FedEx through the holidays this year, which is a notoriously high-volume delivery period for the company. FedEx announced it would be introducing a holiday surcharge, which could translate to better margins during the notoriously busy season.
Union Pacific Corp (NYSE:UNP)
Union Pacific Corporation is the operator of the 2nd largest U.S. railroad network and looks like a strong pick in the transportation sector at this time. Although Q2 revenue fell 24% year-over-year, the company is still worth a look because rail transport is essential and because of its steady dividend growth history. It is undoubtedly one of the best companies to own in the railroad industry thanks to best-in-class profit margins and the fact that it is a major part of the supply chain in the U.S.
If you are interested in a company like Union Pacific, it’s important to understand that freight activity could continue taking a hit until the economy returns to normal. With that said, its business is well-positioned for a very strong rebound in 2021 and beyond. Union Pacific’s dividend payments are safe at this time due to its solid balance sheet and the company has been focused on increasing the length of its trains which could lead to better cash flows and margins going forward. If the economy continues rebounding better than anticipated or if a COVID-19 vaccine is available this year, Union Pacific could be heading a lot higher.
Landstar System, Inc (NASDAQ:LSTR)
This company is described as a worldwide asset-light provider of integrated transportation management solutions such as transportation logistics and insurance. It basically uses a large network of independent agents to connect shippers in all industries with 3rd party trucking and other transport firms. In a time when logistics are paramount, you can’t go wrong with adding a company making transportation possible for thousands of different businesses.
Since Landstar actually doesn’t own or operate truck fleets, but rather connects independent agents and transport providers, it has less exposure to cyclical risk. The stock hit new all-time highs in Monday’s trading session and could continue running. It’s a company that deals with transporting goods like metals, chemicals, foodstuffs, electronics, retail, and automotive products, which tells us that the demand for Landstar’s services is steady. The stock is showing serious relative strength, offers a dividend yield of 0.65%, and has rallied nicely since Q2 earnings were released.
Companies Mentioned in This Article
Compare These Stocks
Add These Stocks to My Watchlist
8 Retail Stocks to Own For the Long Haul
There are more than 500 national retailers traded on the NYSE and the NASDAQ. Given the sheer number of big box stores, warehouse clubs, restaurant chains and other retail stores listed on public markets, it can be hard to identify which retailers are going to outperform the market.
Fortunately, some of Wall Street's top analysts have already done most of the work for us.
Every year, analyst issue approximately 4,200 distinct recommendations for retail companies. Analysts may not always get their "buy" ratings right, but it's worth taking a hard look when several analysts from different brokerages and research firm are giving "strong buy" and "buy" ratings to the same retailer.
This slide show lists the 8 retail companies that have the highest average analyst recommendations from Wall Street's equities research analysts over the last 12 months.
View the "8 Retail Stocks to Own For the Long Haul".