Air Logistics

4 Transportation Stocks for a Soaring Global Economy

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…

Read More: 4 Transportation Stocks for a Soaring Global Economy

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