The global transportation industry is propelled by factors like urbanization and population growth, increasing demand for online shopping via e-commerce platforms, and infrastructure development.
Given this backdrop, it could be wise to invest in fundamentally strong transportation stocks, such as FedEx Corporation (FDX), Westinghouse Air Brake Technologies Corporation (WAB), and Universal Logistics Holdings, Inc. (ULH), which are moving the economy forward.
Supply-side and demand-side trends greatly affect the global logistics market, with trade agreements between nations being a key demand driver. Efforts to boost international trade have also increased the need for logistics services to support importers and exporters. Therefore, the global logistics market is expected to reach $6.55 trillion by 2027, growing at a CAGR of 4.7%.
Moreover, governments and private entities are investing in infrastructure projects to enhance connectivity, reduce congestion, and improve overall transportation efficiency. This is expected to be a significant tailwind for the sector, prospectively propelling the companies operating in this space. The global transportation industry is projected to reach $11.10 trillion by 2030, expanding at a 5.4% CAGR.
In light of these encouraging trends, let’s look at the fundamentals of the three transportation stocks.
FedEx Corporation (FDX)
FDX provides transportation, e-commerce, and business services in the U.S. and internationally. The company operates in segments like FedEx Express; FedEx Ground; FedEx Freight; and FedEx Services.
On March 19, FDX’s FedEx Express expanded its operations in the Middle East with its new state-of-the-art Middle East, Indian Subcontinent, and Africa hub at Dubai World Central Airport in Dubai South. The launch of the hub marked a long-term investment of over $350 million into the UAE’s economy through infrastructure and technological advancements in the facility.
FDX’s trailing-12-month ROCE and ROTA of 16.12% and 4.98% are 30% and 1.3% higher than the industry averages of 12.40% and 4.91%, respectively. Similarly, the stock’s trailing-12-month CAPEX/Sales of 5.90% is 102.3% higher than the industry average of 2.92%.
FDX’s total revenue rose marginally year-over-year to $22.11 billion for the fourth quarter that ended May 31, 2024. Its non-GAAP operating income increased 5.6% from the year-ago value to $1.87 billion. The company’s non-GAAP net income came in at $1.34 billion and $5.41 per share, indicating increases of 7.2% and 9.5% from the prior year’s quarter, respectively.
Street expects FDX’s revenue and EPS for the first quarter (ending August 2024) to increase 1.8% and 10.3% year-over-year to $22.07 billion and $5.02, respectively. Furthermore, the company surpassed the consensus EPS estimates in three of the trailing four quarters.
FDX’s stock has gained 25.6% over the past six months and 17.4% over the past year to close the last trading session at $306.62.
FDX’s POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
FDX has a B grade for Growth, Sentiment, and Quality. It is ranked first out of 16 stocks in the Air Freight & Shipping Services industry.
For additional FDX’s Momentum, Stability, and Value, click here.
Westinghouse Air Brake Technologies Corporation (WAB)
WAB provides technology-based locomotives, equipment, systems, and services for the freight rail and passenger transit industries worldwide.
On July 18, 2024, WAB announced that its Board of Directors declared a regular quarterly common dividend of 20 cents per share, payable on August 28, 2024. WAB pays an annual dividend of $0.80 per share, which translates to a yield of 0.48% on the current share price. Its four-year average dividend yield is 0.59%. The company’s dividend payouts have grown at a CAGR of 15.5% over the past three years.
WAB’s trailing-12-month gross profit margin and EBIT margin of 31.40% and 14.60% are marginally and 43.6% higher than the industry average of 31.13% and 10.17%, respectively. Its trailing-12-month net income margin of 9.20% is 50.6% higher than the industry average of 6.11%.
For the first quarter that ended September 30, WAB’s net sales increased 13.8% year-over-year to $2.50 billion. The company’s gross profit and income from operations came in at $815 million and $412 million, up 22.6% and 49.3% from the prior year’s quarter, respectively.
In addition, the company’s net income grew 60.1% year-over-year to $277 million. Its adjusted EPS increased 47.7% from the year-ago value to $1.89.
Analysts expect WAB’s revenue and EPS for the second quarter (ended June 2024) to increase 8.7% and 33.6% year-over-year to $2.62 billion and $1.88, respectively. Furthermore, the company has topped the consensus EPS and revenue estimates in each of the trailing four quarters, which is impressive.
Shares of WAB have surged 31.1% over the past six months and 46.5% over the past year to close the last trading session at $166.10.
WAB has an overall B rating, equating to a Buy in our proprietary rating system. WAB also has a B grade for Quality, Growth, and Sentiment. It is ranked #2 out of 16 stocks in the Railroads industry.
To see additional POWR Ratings for Momentum, Value, and Stability, click here.
Universal Logistics Holdings, Inc. (ULH)
ULH offers transportation and logistics solutions internationally. The company provides truckload services, domestic and international freight forwarding, and customs brokerage services.
ULH’s trailing-12-month EBIT margin and net income margin of 10.75% and 7.02% are 5.8% and 14.9% higher than the respective industry averages of 5.75% and 6.11%. Its trailing-12-month ROCE of 22.90% is considerably higher than the industry average of 12.59%.
During the first quarter that ended March 30, 2024, ULH’s total operating revenues increased 12.5% year-over-year to $491.91 million. Its EBITDA grew 70.8% from the year-ago value to $96.90 million. The company’s net income came in at $52.46 million and $1.99 per share, up 110.9% and 109.5% from the prior year’s quarter, respectively.
Street expects ULH’s revenue for the second quarter (ended June 2024) to increase 11.9% year-over-year to $461.60 million. Its EPS for the same quarter is expected to grow 26.7% year-over-year to $1.14. Also, the company has topped the consensus revenue estimates in three of the four trailing quarters, which is impressive.
The stock gained 76.6% over the past nine months to close the last trading session at $43.39.
It’s no surprise that ULH has an overall rating of B, which translates to a Buy in our POWR Ratings system. ULH also has a B grade for Value, Momentum, Growth, and Sentiment. It is ranked #3 in the Air Freight & Shipping Services industry.
Beyond what is stated above, we’ve also rated ULH for Stability and Quality. Get all ULH ratings here.
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FDX shares were trading at $304.77 per share on Friday morning, down $1.85 (-0.60%). Year-to-date, FDX has gained 21.75%, versus a 16.31% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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