4 Transportation Stocks That Could Beat The Market In 2018
Zacks Investment Research | Dec 22, 2017 03:13AM ET
It is a well-established fact that the widely-diversified transportation sector including airline companies, railroads, truckers, shippers to name a few, has struggled for the better part of 2017. Sector participants have been plagued by a number of headwinds like disruptions from back-to-back hurricanes, the devastating earthquake in Mexico, declining automotive volumes, issues related to customer dissatisfaction and high costs (labor as well as fuel).
The lackluster performance of the sector in the first nine months of the year can be seen from the graph below. The chart clearly indicates that the sector has climbed only 8.8%, underperforming the S&P 500 Index, which appreciated 12.6% over the same period.
Uptrend Over the Last Few Months
However, matters have been changing for the better over the past few months on the back of several tailwinds. We are optimistic about the fact that the sector has outperformed the S&P 500 index in a month. It has gained 6.8% compared with the S&P 500 index that advanced 3.5% over the same time frame.
Railroads Poised for a Great 2018
Railroads have been benefiting since the beginning of 2017 after struggling for the past couple of years. The prime factors contributing to this improved scenario are increased coal and intermodal revenues.
Particularly with President Donald Trump’s presidency, the coal industry is seeing better days. The President is aiming to revive the industry by relaxing regulations, which were hurting its prospects.
The rise in natural gas prices is also favorable to boosting demand for coal. Moreover, per the U.S. Energy Information Administration (EIA), coal production in the United States will increase in 2018. Since revenues from coal contribute significantly to the railroads’ top line, any positive development for the commodity means good news for the sector.
Apart from coal, the scenario pertaining to another key source of revenues for railroads and intermodal, has improved by leaps and bounds this year. In fact, intermodal shipments are expected to grow .)
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FedEx Corporation offers customers a one-stop source for global shipping, logistics and supply chain solutions. This Zacks #2 Ranked player has an encouraging expected earnings growth rate (next 3-5 years) of 12.8%, higher than the industry’s 11% growth. The forward price-to-earnings (P/E) ratio for the current financial year (F1) is 20.1, lower than the industry average of 26.5.
The company has a market capitalization of $63.95 billion and a strong VGM Score of A. Additionally, the stock has returned 34.4% on a year-to-date basis.
Gol Linhas Aereas Inteligentes S.A. (NYSE:GOL) is a low-cost, low-fare Latin American airline, headquartered in Sao Paulo, Brazil. The company has a market capitalization of $1.43 billion and is a #1 Ranked player. It has a commendable VGM score of A. The stock has seen the Zacks Consensus Estimate for 2018 being revised 23.3% upward over the last 30 days.
The company has returned more than 100% so far this year.
SkyWest, Inc. (NASDAQ:SKYW) is the holding company for two scheduled passenger airline operations and an aircraft leasing company. The company carries a Zack Rank #2 and has a market capitalization of $2.70 billion. It has a VGM score of A.
The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 1.5% upward over the last 60 days. For the upcoming year, the metric has moved 4.3% north over the same time frame.
The stock has returned 49.4% on a year-to-date basis.
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