The transportation sector has been a big catalyst in the stock market’s recent bull run. Over the past twelve months, the transportation sector has outperformed the S&P 500, up 18.42% versus the S&P’s 10.48% rise. Below we take a look at a few transportation plays that may be good investments as the bull market continues.
UPS and FedEx
Analysts at Oppenheimer recently initiated coverage on two big name transportation and shipping stocks with some very positive commentary.The analysts initiated coverage on UPS at “Outperform,”citing the company’s consistent operational and financial execution.
Oppenheimer analysts also started UPS competitor FedEx (FDX) with an “Outperform” rating. They see FDX shares reaching $124, which suggests a 15% upside to Tuesday’s closing price of $107.91. While the company continues to restructure to meet profit goals, the analysts believes FedEx can continue revenue growth. Oppenheimer isn’t the only firm with a bullish view of FedEx. Credit Suisse initiated coverage on FedEx at “Outperform,” as well.
Over the past twelve months, UPS shares are up 11.94% while FedEx shares are up 21.93%. Many analysts and investors, according to Oppenheimer, are underestimating the ability for these companies to continue their run up. As the economy slowly recovers, and the significance of the US Postal Service dwindles, these firms should be able to see significant revenue and profit growth.
Ground and air transportation companies are not the only stocks getting in on the actions. Railroad transporting companies like Norfolk Southern Corp. (NSC) and CSX Corp. (CSX) have been performing well, with the possibility of more upward movement. Over the past year, these stocks are up 13.18% and 15.62%, respectively.
Investors should also take a look at price to earnings (P/E) when assessing these railroad plays. NSC trades about 14 times its earnings and CSX trades a bit over 13 times its earnings; both are considered modest statistics. Couple this with mid-2% dividend yields, and these equities can be stable assets for any portfolio.
Though there had been concerns about Norfolk Southern and CSX Corp.’s exposure to coal, those risks have started to dissapte. Many analysts agree that the problems with coal price have bottomed out and the stocks should be on the rise again. Barron’s has even suggested that CSX shares could rise 33% over the next year.
If you are looking for a way to get exposure to a wide variety of transportation stocks, consider a transportation ETF like the SPDR S&P Transportation ETF (XTN) as a way to diversify your portfolio. For more, check out ETF Database’s Definitive List of Transportation Equities ETFs.
The Bottom Line
Bull market rallies depend on a leadership from a variety of sectors. Right now, transportation stocks have been the catalyst that the markets have needed to hit recent highs. Though there is no guarantee that the transportation sector will continue to lead the way in the markets, investors should still consider these stocks to help see good returns as the market run up continues.
FREE Dividend Stock Newsletter
Get the Dividend.com email newsletter to receive:
- A free copy of our acclaimed report, 5 Rules of Winning Dividend Stock Investing
- Free daily investing tips and picks from Dividend.com CEO Paul Rubillo
- Tons of great market analysis and recommendations