The transportation industry was severely disrupted by the COVID-19 pandemic, but its recovery is now well underway. With the reopening of major economies worldwide, transportation companies are expected to see rising demand for their cross-border services. Indeed. the global transportation services market is projected to hit $7.8 trillion by 2027, growing at a 3.4% CAGR from 2020. With e-commerce growth expected to continue this year and beyond, and with continued technological advances, the industry is expected to keep growing.
Investors’ interest in the transportation industry is evidenced by the First Trust Nasdaq Transportation ETF (FTXR) and the SPDR S&P Transportation ETF’s (XTN) 24.8% and 24.7% returns, respectively, so far this year. This compares to SPDR S&P 500 Trust ETF’s (SPY) 13% gains over this period.
Given the industry’s solid growth prospects along with the recovery of the global economy, we think it is wise to bet on prominent global transportation players United Parcel Service, Inc. (UPS), FedEx Corporation (FDX), Old Dominion Freight Line, Inc. (ODFL), and Landstar System, Inc. (LSTR). They are well positioned to capitalize on the industry tailwinds.
United Parcel Service, Inc. (UPS)
As one of the most popular package delivery companies, UPS operates through three segments: U.S. domestic package operations, international package operations, and supply chain & freight operations. It provides letter and package delivery, transportation, logistics, and financial services.
The company’s net revenues came in at $22.91 billion for the first quarter, ended March 31, which represents a 27.1% year-over-year rise. UPS’ revenue from its U.S. its domestic segment increased 22.3% year-over-year to $14.01 billion, led by growth from small- and medium-sized businesses. Its non-GAAP operating profit increased 164% year-over-year to $2.95 billion. And its non-GAAP EPS came in at $2.77, up 141% year-over-year.
Analysts expect UPS’ EPS and revenue to increase 32.6% and 10.4%, respectively, year-over-year to $10.91 and $93.43 billion in 2021. It surpassed consensus EPS estimates in each of the trailing four quarters.
On May 24, UPS announced that it is expanding its specialty pharmaceutical offerings by establishing UPS Cold Chain Solutions, which is a holistic suite of cold chain technologies that provide complete, end-to-end temperature-control logistics. This is expected to help the company expand its consumer base. The stock has gained 104.1% over the past year to close Friday’s trading session at $210.63.
It’s no surprise that UPS has an overall B rating, which equates to Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has a B grade for Quality and Sentiment. Click here to see UPS’ ratings for Momentum, Stability, Growth and Value as well.
UPS is ranked #7 of 16 stocks in the A-rated Air freight & Shipping Services industry.
FedEx Corporation (FDX)
Operating for more than five decades, FDX provides transportation, e-commerce, and business services worldwide under its FedEx brand. The company’s segments include FedEx Express, TNT Express, FedEx Ground, FedEx Freight and FedEx Services.
FDX’s net sales for its fiscal third quarter, ended February 28, 2021,came in at $21.51 billion, which represents a 23% year-over-year rise. The company’s non-GAAP net income has increased by 153.1% year-over-year to $939 million. Also, its non-GAAP EPS has increased by 146.1% year-over-year to $3.47.
The company’s EPS is expected to increase 92.5% year-over-year to $4.87 for the about-to-be-reported quarter, ended May 31, 2021. FDX surpassed consensus EPS estimates in each of the trailing four quarters. Its annual revenue is expected to increase 19.5% year-over-year to $82.74 billion in 2021.
FDX and Adobe Inc. (ADBE) announced a new, multi-year collaboration on April 27, 2021, beginning with the integration of ShopRunner—which is a leading e-commerce platform and subsidiary of FedEx Services—with Adobe Commerce. This is expected to provide FDX an edge over its peers. The stock soared more than 117% over the past year to close Friday’s trading session at $302.12.
FDX’s POWR Ratings reflects this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. It has an A grade for Growth, and a B grade for Sentiment and Quality. Click here to see FDX’s ratings for Value, Momentum and Stability as well.
FDX is ranked #4 in the A-rated Air freight & Shipping Services industry.
Old Dominion Freight Line, Inc. (ODFL)
ODFL is a union-free motor carrier providing regional, inter-regional and national less-than-truckload (LTL) services. It has 247 service centers across 48 states and offers various value-added services also, such as container drayage, truckload brokerage, and supply chain consulting.
For the first quarter, ended March 31, 2021, ODFL’s total revenue was $1.13 billion, which represents a 14.1% year-over year rise. The company’s net income increased to 49.7% from the prior-year quarter to $199.36 million. Its EPS was $1.70, up 53.2% year-over-year.
For the current quarter, ending June 30, 2021, analysts expect ODFL’s EPS and revenue to increase 64% and 36.3%, respectively, year-over-year to $2.05 and $1.22 billion. Furthermore, it surpassed the Street’s EPS estimates in each of the trailing four quarters.
ODFL expanded its network in February 2021 by adding nine service centers in new and existing markets, including Brooklyn, Edinburgh and Grand Island. The company’s senior vice president of strategic planning, Chip Overbey said, “Shippers can expect to see improved transit times, faster response times and adequate capacity to meet their transportation needs.” The stock has rallied 56.9% over the past year to close Friday’s trading session at $260.27.
ODFL’s strong fundamentals are reflected in its POWR Ratings. It has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has an A grade for Quality, and a B grade for Stability and Momentum. Click here to see the additional POWR Ratings for ODFL (Sentiment, Growth and Value).
ODFL is ranked #10 of 22 stocks in the A-rated Trucking Freight industry.
Landstar System, Inc. (LSTR)
LSTR is a worldwide, asset-light provider of integrated transportation management solutions delivering safe, specialized transportation services to a broad range of customers utilizing a network of agents, third-party capacity providers and employees. It operates through two segments: transportation logistics and insurance.
The company’s revenue increased 38.8% year-over-year to $1.29 billion for its fiscal first quarter, ended March 27, 2021. LSTR’s revenue generated from the truck transportation segment came in at $1.19 billion, up 39.7% year-over-year. Its net income increased 88.9% year-over-year to $77.24 million. Its EPS came in at $2.01, which represents a 93.3% year-over-year increase.
Analysts expect LSTR’s EPS and revenue to increase 258.7% and 82.3%, respectively, year-over-year to $2.26 and $1.43 billion for the current quarter ending June 30, 2021. It surpassed consensus EPS estimates in three of the trailing four quarters.
The company’s President and CEO Jim Gattoni said, “Landstar’s 2021 first quarter set a new standard as the best first quarter financial performance in our history. Given the exceptional performance by Landstar in the 2021 first quarter, I believe the stage has now been set for what should be a record-setting year.” The stock has gained 40.7% over the past year to close Friday’s trading session at $160.79.
LSTR has an overall B rating, which equates to Buy in our POWR Ratings system. The stock has a B grade for Growth and Quality. Click here to see the additional POWR Ratings for LSTR (Momentum, Stability, Sentiment and Value).
LSTR is ranked #9 in the Trucking Freight industry.
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UPS shares were trading at $211.44 per share on Monday morning, up $0.81 (+0.38%). Year-to-date, UPS has gained 26.96%, versus a 13.14% rise in the benchmark S&P 500 index during the same period.
About the Author: Ananyo Guha Niyogi
Ananyo’s ardent interest in capital markets, wealth management, and financial regulatory issues, led him to a career as an investment analyst. His goal is to educate individual investors by making complex financial issues easy to understand. More...
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