Yahoo Finance 3 Transport-Services Stocks to Watch in a Challenging Industry
The U.S. equity markets continue to be affected by extreme volatility. With inflation woes far from over, economic uncertainty is rampant. High operating costs and supply-chain woes, too, act as major deterrents. All these factors are denting the prospects of stocks in the Zacks Transportation-Services industry.
Nonetheless, we recommend keeping a close eye on three industry players, namely Expeditors International of Washington EXPD, C.H. Robinson Worldwide CHRW and Schneider National SNDR, which are better positioned to brave multiple industry challenges.
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
Economic Uncertainty: Despite a strong performance by major indices in March, the fact remains that we are by no means out of the woods especially with respect to inflation-related woes. The recent production cut by the OPEC+ oil cartel, which includes OPEC members plus Russia, has led to a surge in oil prices. This may aggravate inflationary pressure and result in heightened economic uncertainty and market volatility. The recent turmoil in the banking sector — popularly known as the engine of economic growth — also does not bode well.
Supply-Chain Disruptions & High Costs: Although economic activities picked up from the pandemic gloom, supply-chain disruptions continue to dent stocks in the industry. Increased operating costs are also limiting bottom-line growth. The industry players are distressed by rising logistic expenses. The labor market has struggled with the limited availability of labor, which is driving-related expenses. Costs will likely continue to be steep due to supply-chain troubles.
Strong Financial Returns for Shareholders: With economic activities gaining pace from the pandemic lows, more and more companies are allocating their increasing cash pile by way of dividends and buybacks to pacify long-suffering shareholders. This underlines their financial strength and confidence in business. Among the Transportation - Services industry players, Schneider National announced a 12.5% increase in the quarterly dividend in February.
Zacks Industry Rank Indicates Dull Prospects
The Zacks Transportation - Services industry is a 26-stock group within the broader Zacks Transportation sector. The industry currently carries a Zacks Industry Rank #190, which places it in the bottom 24% 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. The industry's earnings estimate for 2023 has decreased 25.1% on a year-over-year basis.
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 Surpasses S&P 500 and Sector
The Zacks Transportation-Services industry has outperformed the Zacks S&P 500 composite and the broader Transportation sector over the past year.
The industry has declined 2.7% over this period compared with the S&P 500's depreciation of 9.3% and the broader sector’s decline of 7.6%.
One-Year Price Performance
Industry's Current Valuation
Based on the forward 12-month price-to-sales, a commonly used multiple for valuing Transportation-services stocks, the industry is currently trading at 1.72X compared with the S&P 500's 3.57X. The value is, however, higher than the sector's trailing 12-month P/S of 1.54X.
Over the past five years, the industry has traded as high as 2.33X, as low as 1.41X and at the median of 1.94X.
Price-to-Sales Ratio (F12M)
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. Efforts to reward its shareholders are commendable as well.
Expeditors has an impressive earnings track record. The bottom line surpassed the Zacks Consensus Estimate in three of the trailing four quarters (missing the mark on the other occasion), the average beat being 5.69%. The stock has witnessed a 0.2% upward revision of the Zacks Consensus Estimate for current-year earnings over the past 30 days.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here
Price and Consensus: EXPD
C.H. Robinson Worldwide, currently carrying a Zacks Rank #3, operates as an asset-light logistics player. Efforts to control costs bode well for this freight broker. Measures to reward CHRW's shareholders instill further confidence in the stock.
C.H. Robinson surpassed the Zacks Consensus Estimate in two of the trailing four quarters (missing the mark in the remaining ones), the average surprise being 7.64%.
Price and Consensus: CHRW
Schneider National, currently carrying a Zacks Rank #3, is being aided by strong performances in the Truckload and Intermodal segments. The Truckload segment is benefiting from Midwest Logistics Systems’ revenues, effective yield management and dedicated new business growth.
The Intermodal unit is being aided by a rise in revenue per order and brokerage volume growth. Efforts to reward its shareholders are commendable as well. SNDR’s sound liquidity position is an added positive. Over the past 60 days, the Zacks Consensus Estimate for 2023 has moved 0.9% north.
Price and Consensus: SNDR
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Expeditors International of Washington, Inc. (EXPD) : Free Stock Analysis Report
C.H. Robinson Worldwide, Inc. (CHRW) : Free Stock Analysis Report
Schneider National, Inc. (SNDR) : Free Stock Analysis Report
