3 Transportation Stocks to Buy on the Dip
As industrial activities gain pace with the recovery of major economies, the transportation services market is witnessing a significant surge in deman...
As industrial activities gain pace with the recovery of major economies, the transportation services market is witnessing a significant surge in demand for cross-border services. Also, because freight demand remains high, we believe transportation companies United Parcel (UPS), Union Pacific (UNP), and J.B Hunt (JBHT) could be solid picks now because they are well-positioned to capitalize on the industry tailwinds and are currently trading below their 52-week highs. So read on for a closer evaluation of these names.
Because many industries have resumed operating at close to full capacity on the recovery of economies, the transportation services market is experiencing a substantial upsurge in demand for cross-border services. In addition, because consumers continue to rely heavily on online shopping, freight demand has risen dramatically in recent months, surpassing the trucking industry's capacity to recruit new drivers and buy new equipment.
Rapid technological advancements, growing urbanization, and e-commerce expansion are anticipated to be the transportation industry’s major growth drivers. Consequently, the global transportation market is expected to hit $7.8 trillion by 2027, representing a 3.4% CAGR.
Therefore, we think the recent share-price price dips in fundamentally sound transportation companies United Parcel Service Inc. (UPS), Union Pacific Corporation (UNP), and J.B Hunt Transportation Services Inc. (JBHT) provide good entry opportunities.
United Parcel Service Inc. (UPS)
UPS delivers shipping and global supply chain management services. U.S. Domestic Package; International Package; and Supply Chain & Freight are the three operational segments of the Atlanta, Ga.-based company. It owns 58,000 cargo containers and manages a fleet of nearly 127,000 package cars, vans, tractors, and motorbikes.
In May, UPS launched Cold Chain Solutions, a comprehensive suite of cold chain technologies, new and expanded worldwide facilities that provide complete, end-to-end temperature-controlled logistics. With this solution, the company aims to assist pharmaceutical companies, healthcare providers, and laboratories in meeting the growing demand for critical products worldwide.
During the second quarter, ended June 30, 2021, UPS’ revenue increased 14.5% year-over-year to $23.42 billion. Its operating income rose 47.3% from its year-ago value to $3.26 billion. Its net income increased 51.4% year-over-year to $2.68 billion, while its EPS grew 50.3% from the prior-year quarter to $3.05.
The company's EPS is expected to grow 33% year-over-year to $10.95 in the current year. In addition, analysts expect UPS' revenue to increase 10.9% in its fiscal year 2021. The stock has gained 31.8% over the past year to close yesterday’s trading session at $190.79. However, it is currently trading 13.1% below its 52-week high of $219.59, which it hit on May 10, 2021.
UPS's POWR Ratings reflect this promising outlook. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
UPS has rated a B grade for Stability and Quality. In addition, within the A-rated Air Freight and Shipping Services industry, it is ranked #10 of 16 stocks.
To see additional POWR Ratings for Growth, Sentiment, Value, and Momentum for UPS, click here.
Union Pacific Corporation (UNP)
UNP is a railroad operating company that is based in Omaha, Neb. The company offers transportation services for various goods, including grain products, fertilizers, food and refrigerated products, coal and renewables to grain processors, and others.
In May, UPN announced a plan to build a new intermodal terminal in the center of the import distribution zone of Southern California. The company intends to open the new terminal in the second quarter of 2021 to give consumers greater access to Chicago and other major markets. This initiative could help the company to boost its revenue and drive business growth.
UNP's revenue increased 29.7% year-over-year to $5.50 billion in the second quarter, ended June 30, 2021. Its operating income surged 49.5% year-over-year to $2.47 billion. The company's net income increased 58.8% from its year-ago value to $1.80 billion over this period. And UNP’s EPS increased 62.9% year-over-year to $2.72.
The company’s EPS is expected to grow 18.6% year-over-year to $9.71 in its fiscal year 2021. Analysts expect UNP’s revenue to increase 9.1% year-over-year to $21.31 billion in the current year. The stock has soared 25.3% over the past year to close yesterday’s trading session at $217.62. It is currently trading 5.9% below its $231.26 52-week high, which it hit on May 10, 2021.
UNP’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. UNP also has an A grade for Quality, and a B for Stability and Sentiment. In addition, the stock is ranked #2 of 17 stocks in the Railroads industry.
Beyond the POWR Ratings grades we have just highlighted, one can see the UNP ratings for Growth, Value, and Momentum.
J.B Hunt Transportation Services Inc. (JBHT)
JBHT in Lowell, Ark., provides surface transportation and delivery services in North America. Intermodal (JBI); Dedicated Contract Services (DCS); Integrated Capacity Solutions (ICS); Final Mile Services (FMS); and Truckload (JBT) are the segments through which the company operates.
In June, JBHT and Waymo, the world's premier autonomous driving technology company, announced a collaboration to autonomously move freight in Texas for one of JBHT’s major customers. This move might enable the company to establish itself as an industry leader by improving its operational efficiency while ensuring safety.
In the second quarter, ended June 30, 2021, JBHT’s revenue increased 35.6% year-over-year to $2.91 billion. Its operating income grew 37.9% year-over-year to $241.55 billion. The company's net income increased 41.5% from its year-ago value to $172.16 billion over this period, and its EPS grew 41.2% from the prior-year quarter to $1.61.
A $6.59 consensus EPS estimate for the current year represents a 39% increase year-over-year. The $11.3 billion consensus revenue estimate for the current year represents a 17.2% increase from the same period last year. The stock has surged 26.8% over the past year to close yesterday’s trading session at $167.64. It is currently trading 8.8% below its 52-week high of $183.80, which it hit on May 10, 2021.
JBHT's POWR Ratings reflect this promising outlook. JBHT has a B grade for Momentum and Quality. Within the A-rated Trucking Freight industry, it is ranked #14 of 23 stocks.
Click here to see additional POWR Ratings for Growth, Value, Stability, and Sentiment for JBHT.
UPS shares were trading at $190.69 per share on Thursday morning, down $0.10 (-0.05%). Year-to-date, UPS has gained 14.50%, versus a 18.68% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.3 Transportation Stocks to Buy on the Dip appeared first on StockNews.com