Three transportation stocks to buy show strength in performance metrics that could pay off with enhanced share-price gains.
The three transportation stocks to buy come from different sectors of the industry but each shines in their respective niches. Each of the three transportation stocks also is a recommendation of BofA Global Research’s equity research analyst Ken Hoexter.
Military moves in the Middle East have increased the risk of shipping goods through that region and some of the normal routes have been changed to limit exposure to attacks by terrorists or certain foreign governments. The key is to choose the right risks for investing.
Three Transportation Stocks to Buy Show Strength: Perry’s Perspective
Bryan Perry, who heads the Premium Income Pro advisory service, recently wrote that there are several bullish catalysts converging. It is a full 180-degree change from just two weeks ago, when investors fretting about weak jobs data and geopolitical tensions had the equity market in full retreat, he added. But the S&P rallied nearly 500 points in the span of just 10 days.
Other developments that are bringing buyers off the sidelines is the current narrative that is embracing the notion of cooling labor markets, resilient consumer spending, healthy capital investment and a dovish Fed. Perry opined. There are some points of contention about rising bankruptcies, loan delinquencies, slowing auto sales and softer travel data — but at the moment — the market does not seem to care, he added.
“It cares about piling on further gains because it senses lower interest rates are the greatest force at work for asset appreciation,” Perry wrote.
Perry informed his Cash Machine investment newsletter subscribers on Tuesday, Aug. 27, about what happens if another government manufactured “blowout” upside surprise occurs, only to be dramatically revised lower six, nine or 12 months from now. His rub with politicized economic data leading up to elections is that the statistics can manipulate true market conditions, he added.
“What drives stock prices higher or lower is headlines, and investors have determined that an 818,000 revision lower of jobs created over the past year has no impact on market sentiment,” Perry wrote. “It simply sent a message that despite the ‘phantom all-world jobs market’ that the government boasted so loudly of, the Fed might have to pull forward future rate cuts in larger size, which will be taken as good news for stocks. Reading and interpreting the headlines is what feeds the underlying bullish sentiment. For now, both bad and good news are bullish for stocks.”
Jim Woods, who heads the Successful Investing investment newsletter, currently has Union Pacific (NYSE: UNP) in his publication’s Income Multiplier Portfolio. He is a strategic investor in transportation stocks and likes UNP as a dividend payer.
Jim Woods, a former U.S. Army paratrooper, co-heads Successful Investing and Fast Money Alert.
His Successful Investing’s unique measure of the domestic and international markets, the Domestic Fund Composite (DFC) and the International Fund Composite (IFC), both moved higher recently. The advances in international stocks were particularly notable as traders game the yen/carry trade and the effects of a tepid U.S. dollar, Woods added.
Three Transportation Stocks to Buy Show Strength: FedEx (FDX)
FedEx Corp. (NYSE: FDX), a Memphis, Tennessee-based multinational courier delivery service company known for its overnight shipping, is rated a “buy” recommendation of BofA Global Research. On June 25, FedEx reported results for the fiscal fourth quarter ended May 31 with revenue rising modestly compared with the prior year period. Operating income and margin improved, showing reduced structural costs as FedEx continues to execute on its DRIVE program to cost cuts in various businesses.
The DRIVE transformation spans 14 domains across four major areas. They include Customer, Surface Network, Air Network & International, and General and Administrative (G&A). FedEx expects DRIVE to generate $4.0 billion of permanent cost reductions in fiscal 2025.
“We made significant progress in fiscal 2024 and ended the year strong, delivering four consecutive quarters of expanding operating income and margin in a challenging revenue environment,” said Raj Subramaniam, FedEx Corp. president and chief executive officer.
FedEx management expects this momentum to continue in fiscal 2025 as it seeks to create the world’s “most flexible, efficient, and intelligent network,” Subramaniam said. In addition, FedEx Ground operating results increased due to cost cutting from its DRIVE initiatives, increased yield, slimmed-down self-insurance costs and gains in ground commercial volume.
Income investors will like the company’s status as a cash cow with its return of $3.8 billion to its shareholders through stock repurchases and dividends during fiscal 2024 ending May 31. Among other plans to enhance efficiency and boost its cash flow, FedEx expects to reduce its daytime domestic flying time by 60% and the number of city destinations by 55% when its air cargo contract with the U.S. Postal Service expires on Sept. 29, according to BofA Global Research.
Separately, FedEx is rolling out a new logo for its freighter aircraft to reflect the combination of its Express and Ground networks. Another brand enhancement is that FedEx announced plans to start covering cargo jets with new graphics to present a unified image. The logo will feature larger FedEx lettering and different positioning with the intent of showing a modernized look, BofA wrote in a recent research note.
Chart courtesy of www.stockcharts.com
Three Transportation Stocks to Buy Show Strength: J.B. Hunt (JBHT)
J.B. Hunt Transport Services Inc. (Nasdaq: JBHT), of Lowell, Arkansas, is both an S&P 500 company and a component of the Dow Jones Transportation Average. J.B. Hunt Transport Inc., a wholly owned subsidiary of JBHT, is far from a one-trick transportation company.
It offers an array of services that include intermodal, dedicated, refrigerated, truckload, less-than-truckload, flatbed, single source, last mile, transload and more. Operating income for second-quarter 2024 decreased 24% to $205.7 million, compared with $270.7 million for the same period of 2023.
The decrease in operating income was primarily due to lower revenue, and higher insurance and claims, equipment-related, and certain personnel-related expenses, the company reported. Operating income as a percentage of gross revenue decreased year-over-year due to the same expenses, only partially offset by reduced rail and truck transportation costs as a percentage of gross revenue. Net interest expense for the current quarter rose roughly 38% from second-quarter 2023 due to higher effective interest rates and consolidated debt balance, partly offset by higher interest income.
JBHT, an integrated freight and logistics company, is a buy recommendation of BofA Global Research.
Chart courtesy of www.stockcharts.com
Three Transportation Stocks to Buy Show Strength: Teekay Tankers (TNK)
Bargain hunters may like the more than 20% drop in the price of Teekay Tankers (NYSE: TNK) during the past three months. The Hamilton, Bermuda-based shipper of crude oil still has strong fundamentals, despite its recent drop.
The stock is a “buy” recommendation of BofA Global Research, which the shipping company taking incremental steps to renew its fleet by agreeing to sell two of its oldest vessels, while acquiring a 2021-built Aframax vessel, Orchid Spirit.
With the Trans Mountain Pipeline expansion continuing to ramp up towards one Aframax cargo per day, vessel attacks in the Red Sea continue to divert ships. A new delivery schedule is low on historical terms, while the mid-size tanker market is expected to remain well supported through the remainder of 2024, company officials said.
They also expressed optimism about the operating environment for mid-size tankers in the coming years. With high operating leverage to the spot tanker market and a debt-free balance sheet, Teelay Tankers is pursuing growth opportunities that are aimed at driving value creation in both the near and long-term, its leaders said.
BoA also rates Teekay Tankers as a buy recommendation. It is a former recommendation of Mark Skousen, PhD, in his Forecasts & Strategies investment newsletter. However, Skousen currently is not recommending the stock amid its double-digit percentage drop during the past several months.
Ben Franklin scion Mark Skousen, who heads Five Star Trader and Forecasts & Strategies, talks to Paul Dykewicz.
The three transportation stocks to buy show the potential to produce gains for patient investors who realize short-term economic concerns should not be ignored. With a presidential election, traditional races for the House seats that have two-year terms and expiring Senate terms, investors have some uncertainty to assess before pursuing purchases.
Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, GuruFocus and other publications and websites. Paul is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is the editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. Follow Paul on Twitter @PaulDykewicz.
