The onset of the global pandemic dealt a hard blow to the global supply chain. China’s strict lockdowns earlier this year aligning its zero-COVID policy and the ongoing geopolitical tensions in eastern Europe have also posed a crisis for the supply chain. Now, as businesses are trying to adapt to the centrality of logistics, both technology adoption and capital allocation have surged. Despite the headwinds, the logistics and transportation industry is entering its second phase of recovery, supported by the return of travel.
A substantial increase in technological advancements, the surge in internet retailing, and online shopping should help the industry thrive this year and beyond. The global logistics market reached a value of $4.92 trillion in 2021. The IMARC Group projected the market to reach $6.55 trillion by 2027, growing at a CAGR of 4.7%.
Given the favorable prospects of the industry, we think fundamentally strong logistics stocks FedEx Corporation (FDX), Deutsche Post AG (DPSGY), and Radiant Logistics, Inc. (RLGT) could be good investments now. These stocks are rated Strong Buy or Buy in our proprietary POWR Ratings system and are currently trading at a discount.
FedEx Corporation (FDX)
FDX is a global logistics company that provides transportation, e-commerce, and business services. The company operates through the FedEx Express; FedEx ground; FedEx Freight; FedEx Services; and Corporate, Other, and Elimination segments.
In June, FDX announced its plans to drive long-term value creation for stakeholders, including the declaration of an increased quarterly dividend of $1.15 per share on its common stock, payable on July 11.
In May, FDX announced the expansion of its pilot program to autonomously move its shipments on an additional commercial lane in Texas, which is expected to help the company safely and reliably deliver its shipments on time.
In terms of its forward EV/Sales, FDX is currently trading at 0.89x, 42.2% lower than the industry average of 1.54x. Its forward Price/Sales multiple of 0.64 is 47.8% lower than the industry average of 1.22.
FDX’s total revenue increased 9.9% year-over-year to $23.64 billion in the third quarter ended February 28. Its non-GAAP operating income grew 37.4% from the year-ago value to $1.46 billion. Its non-GAAP net income improved 29.6% year-over-year to $1.22 billion. The company’s non-GAAP EPS increased 32.3% from its year-ago value to $4.59.
The consensus EPS estimate of $6.88 for the fourth quarter (ended May 2022) indicates a 37.3% improvement year-over-year. The consensus revenue estimate of $24.46 billion for the same quarter represents an increase of 8.2% from the same period last year.
The stock has gained 8.9% over the past three months and 14.4% intraday to close yesterday’s trading session at $229.95.
FDX’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
FDX is rated B in Growth, Value, Sentiment, and Quality. Within the A-rated Air Freight & Shipping Services industry, it is ranked #4 of 17 stocks. To see additional POWR Ratings for Momentum and Stability for FDX, click here.
Deutsche Post AG (DPSGY)
DPSGY, headquartered in Bonn, Germany, operates as a mail and logistics company. The company operates through five broad segments: Express; Global Forwarding, Freight; Supply Chain; eCommerce Solutions; and Post & Parcel Germany.
This month, DPSGY inaugurated a new DHL Freight terminal in Erlensee, Germany, which is expected to increase efficiency and service quality across the company’s European road transport network. In the same month, DHL Supply Chain, DPSGY’s contract logistics specialist, announced the opening of an automated fulfillment center in Bergkamen, Germany, for IKEA, which might benefit the company.
DPSGY’s forward Price/Cash Flow multiple of 4.02 is 67.9% lower than the industry average of 12.50. In terms of its forward EV/Sales, the stock is currently trading at 0.63x, 59% lower than the industry average of 1.54x.
In the first quarter ended March 31, DPSGY’s revenue increased 19.8% year-over-year to €22.59 billion ($23.56 billion). Its EBIT rose 13% from the year-ago value to €2.16 billion ($2.25 billion). Consolidated net profit for the period increased 14.3% year-over-year to €1.45 billion ($1.51 billion), while its EPS grew 14.9% from the prior-year quarter to €1.08.
Analysts expect revenue growth of 3.8% year-over-year to $93.90 billion for fiscal 2022.
DPSGY’s stock has gained 0.5% intraday to close yesterday’s trading session at $36.03.
DPSGY’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, which translates to Strong Buy in our proprietary rating system.
DPSGY has an A grade for Stability and a B for Value, Sentiment, and Quality. It is ranked #3 in the Air Freight & Shipping Services industry. Click here to see the additional POWR Ratings for DPSGY (Growth and Momentum).
Radiant Logistics, Inc. (RLGT)
RLGT operates as a third-party logistics company that provides domestic and international freight forwarding services, freight brokerage services, and other value-added supply chain management services using a network of company-owned and operating partner locations.
In May, RLGT reported that the Securities and Exchange Commission (SEC) had declared its $150 million universal shelf registration statement effective. About this, the company’s founder and CEO, Bohn Crain, said, “This registration statement replaces our previous $100 million universal shelf registration that recently expired and provides us with the continued financial flexibility to access capital to support and accelerate our growth strategy should the opportunity present itself.”
In terms of its forward EV/Sales, RLGT is currently trading at 0.32x, 79.4% lower than the industry average of 1.54x. Its forward Price/Sales multiple of 0.23 is 81.1% lower than the industry average of 1.22.
RLGT’s revenues increased 94.9% year-over-year to $460.90 million in the third quarter ended March 31, 2022. The company’s adjusted EBITDA grew 83.1% year-over-year to $23.60 million. Adjusted net income increased 84% from the prior-year period to $16.83 million, and adjusted net income per common share came in at $0.33, up 83.3% from the prior-year period.
Analysts expect the company’s EPS to grow 51.1% year-over-year to $0.68 for the current year (ending June 2022). Street expects RLGT’s revenue for the same year to increase 59.2% from the prior year to $1.42 billion. Moreover, RLGT has an impressive surprise earnings history, as it has topped consensus EPS estimates in each of the trailing four quarters.
RLGT’s shares have gained 9.8% over the past three months and 7% over the past month to close yesterday’s trading session at $6.74.
It is no surprise that RLGT has an overall rating of B, which equates to Buy in our POWR Ratings system. It has a B grade for Value and Sentiment. The stock is ranked #10 in the Air Freight & Shipping Services industry.
In addition to the POWR Ratings grades we’ve highlighted, one can see the RLGT ratings for Growth, Quality, Momentum, and Stability here.
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FDX shares were trading at $232.62 per share on Wednesday afternoon, up $2.67 (+1.16%). Year-to-date, FDX has declined -9.75%, versus a -19.95% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...
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