The shipping market is poised for growth due to rising demand for fast delivery, expansion of e-commerce, and the expanding global supply chain. So, I think investors could consider buying top shipping stocks Kuehne + Nagel International AG (KHNGY), ZTO Express (Cayman) Inc. (ZTO), and FedEx Corporation (FDX) this month for solid performance.
The air freight and shipping services industry is a dynamic sector driving global logistics and trade. It embraces cutting-edge technology, ensuring efficient and reliable transportation solutions for a seamless flow of goods worldwide.
Globalization, e-commerce growth, and supply chain demands contribute to the industry’s continuous evolution and significance in global commerce. Moreover, the rise in trade-related agreements has facilitated the expansion of global trade networks, further boosting the demand for shipping services.
Additionally, the growing customer demand for faster and streamlined services is a significant factor driving the digital shipping market’s expansion. The global digital shipping market is expected to expand at a CAGR of 21.8% until 2027.
Furthermore, the air Freight & Cargo market is driven by the increasing demand for both domestic and international air freight services, reflecting the industry’s sustained upward trajectory. The United States air freight market is expected to expand at a CAGR of 4.4% until 2028.
Considering these conducive trends, let’s look at the fundamentals of the three best Air Freight & Shipping Services stocks, starting with number 3.
Stock #3: Kuehne + Nagel International AG (KHNGY)
Based in Schindellegi, Switzerland, KHNGY offers integrated services in Sea, Air, Road, and Contract Logistics. Its diverse solutions encompass container shipping, reefer logistics, project logistics, cargo insurance, customs clearance, and time-critical services. Serving industries like aerospace, automotive, consumer goods, healthcare, high-tech, industrial, and perishables, the company also provides supply chain consulting, order management, and e-commerce logistics.
On November 6, 2023, KHNGY’s Healthcare Air Logistics network was certified by IATA for the third time, making it the first logistics company with over 100 certified stations worldwide. This certification ensures the safe and secure handling of pharmaceuticals during air transport.
KHNGY is committed to maintaining high standards in pharmaceutical handling, covering 66 countries globally. This achievement is part of the company’s broader healthcare services, aligning with its growth plans for the future.
KHNGY’s trailing-12-month gross profit margin of 34.23% is 12.9% higher than the industry average of 30.31%. Its 2.05x trailing-12-month asset turnover ratio is 157.4% higher than the 0.79x industry average.
The company pays an annual dividend of $3.12, which translates to a yield of 5.84% on the current market price. Its four-year average dividend yield is 3%.
For the third quarter ended September 30, 2023, KHNGY achieved a gross profit of CHF2.08 billion ($285.39 million). The company generated EBITDA and earnings of CHF640 million ($710.54 million) and CHF321 million ($356.38 million), respectively. Moreover, its EPS and total cash flow from operating activities amounted to CHF2.65 and CHF403 million ($447.42 million), respectively.
Street expects KHNGY’s revenue to grow marginally year-over-year to $27.41 billion for the fiscal year ending December 2024. Its EPS is expected to be $2.33 for the next fiscal year. The company has surpassed the EPS estimates in each of the trailing four quarters, which is impressive.
Shares of KHNGY increased 20.3% over the past year and 14.4% year-to-date to close the last trading session at $53.40.
KHNGY has a B grade for Stability and Quality. Within the B-rated Air Freight & Shipping Services industry, it is ranked #5 out of 14 stocks.
Click here for KHNGY’s additional Growth, Value, Momentum and Sentiment ratings.
Stock #2: ZTO Express (Cayman) Inc. (ZTO)
Headquartered in Shanghai, ZTO is a leading and fast-growing express delivery company in China, serving as a trusted partner for online merchants and consumers. ZTO’s network partner model allows for swift nationwide expansion, emphasizing operational efficiency and economies of scale.
ZTO’s trailing-12-month EBIT margin of 25.21% is 160.4% higher than the industry average of 9.68%. Its 22.03% trailing-12-month CAPEX/Sales is 625.3% higher than the 3.04% industry average.
As of June 30, 2023, the company had purchased an aggregate of 38,473,231 ADSs at an average purchase price of $25.18, including repurchase commissions.
During the second quarter ended June 30, 2023, ZTO generated revenues of RMB 9.74 billion ($1.34 billion), up 12.5% year-over-year. Its gross profit grew 50% year-over-year to RMB 3.30 billion ($455.70 million). The company’s adjusted net income and EBITDA amounted to RMB 2.53 billion ($349.00 million) and RMB 3.88 billion ($535.61 million), up 43.9% and 34.3% year-over-year, respectively.
Analysts expect ZTO’s revenue and EPS to grow 8.7% and 16.9% year-over-year to $1.36 billion and $0.38 for the third quarter ended September 2023. The company has surpassed the EPS estimates in each of the trailing four quarters.
The stock has soared 28.5% over the past year to close the last trading session at $23.69.
ZTO’s POWR Ratings reflect this positive outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
ZTO has a B grade for Stability, Sentiment, and Quality. Within the same industry, it is ranked #4.
In addition to the POWR Ratings stated above, one can access ZTO’s additional Growth, Value and Momentum ratings here.
Stock #1: FedEx Corporation (FDX)
FDX is a global company providing transportation, e-commerce, and business services. It operates through segments like FedEx Express; FedEx Ground and FedEx Freight; offering express transportation, small-package delivery, freight services, and business support. Additionally, the company provides supply chain management solutions, air and ocean cargo transportation, customs brokerage, and trade management tools.
FDX’s trailing-12-month CAPEX/Sales of 6.98% is 129.6% higher than the industry average of 3.04%. Its 1.02x trailing-12-month asset turnover ratio is 28.6% higher than the 0.79x industry average.
On August 29, 2023, FDX increased its shipping rates by an average of 5.9% for Express, Ground, and Home Delivery services, effective January 1, 2024. Freight rates will also go up by 5.9%-6.9%. Additionally, there will be surcharge adjustments, including higher customs clearance fees for imports from January 1 and changes to handling charges for international shipments from January 15, 2024. These changes will help cover operating costs and support ongoing improvements in services.
The company pays $5.04 as dividends annually, which translates to a yield of 2.09% on the prevailing price level, higher than the four-year average dividend yield of 1.56%. The company has raised its dividend payouts at a CAGR of 22.9% over the past three years.
In the first quarter ended August 31, 2023, FDX’s revenue amounted to $21.68 billion. The company’s adjusted operating income and net income increased 29.4% and 28.1% year-over-year to $1.59 billion and $1.16 billion, respectively. Moreover, its adjusted EPS grew 32.3% year-over-year to $4.55.
FDX’s revenue and EPS are expected to increase 2.3% and 16.8% year-over-year to $22.69 billion and $3.98 for the third quarter ending February 2024. The company has surpassed the EPS estimates in each of the trailing four quarters.
The stock has soared 52.6% over the past year and 39.3% year-to-date to close the last trading session at $241.19.
FDX’s POWR Ratings reflect this sound outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
FDX has a B grade for Sentiment and Quality. Within the same industry, it is ranked first.
To see FDX’s additional POWR Ratings for Growth, Value, Momentum and Stability click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
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FDX shares were trading at $243.55 per share on Friday morning, up $2.36 (+0.98%). Year-to-date, FDX has gained 42.90%, versus a 15.41% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities. More...
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