Despite severe supply-side issues caused due to rising inflation and interest rate hikes, certain transportation companies have been performing successfully.
Although the stock market may remain volatile in the short term, investors might consider buying fundamentally sound transportation stocks FedEx Corporation (FDX) and Universal Logistics Holdings, Inc. (ULH) in April.
The U.S. transportation industry was worth $1.36 trillion in 2022, and 10.68 million Americans were working in the transportation and warehousing industry.
Transport services include activities like warehousing and storage designed to help people move from one location to another to obtain services or perform daily tasks like operating warehousing and storage facilities for merchandise, refrigerated goods, and other materials. The transport services market is expected to grow at a CAGR of 7.2% until 2027.
Let’s discuss the stocks mentioned above in detail.
FedEx Corporation (FDX)
FDX provides transportation, e-commerce, and business services in the United States and internationally. The company’s FedEx Express segment offers express transportation, small-package ground delivery, and freight transportation services; time-critical transportation services; and cross-border enablement, technology, and e-commerce transportation solutions.
FDX’s forward EV/Sales multiple of 0.99 is 38.7% lower than the industry average of 1.62. Its forward EV/EBITDA multiple of 9.58 is 9.3% lower than the industry average of 10.56.
FDX’s trailing-12-month CAPEX/Sales of 7.35% is 154.9% higher than the industry average of 2.88%. Its trailing-12-month asset turnover ratio of 1.09% is 36.1% higher than the industry average of 0.80%.
FDX’s service segment revenue increased 33.8% year-over-year to $87 million in the fiscal third quarter, which ended February 28, 2023. The company’s total operating expenses decreased 5.3% year-over-year to $21.13 billion, while ground segment operating income increased 31.7% year-over-year to $844 million.
Analysts expect FDX’s revenue to increase marginally year-over-year to $91.50 billion in 2024. Its EPS is expected to grow 22.7% year-over-year to $18.28 in 2024. It has surpassed EPS estimate in three of four trailing quarter. FDX’s shares have gained 50% over the past six months to close the last trading session at $229.49.
FDX’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
FDX has a B grade for Sentiment and Quality. Within the B-rated Air Freight & Shipping Services industry, it is ranked #4 out of 16 stocks. Click here for the additional POWR Ratings for Growth, Value, Momentum, and Stability for FDX.
Universal Logistics Holdings, Inc. (ULH)
ULH provides transportation and logistics solutions in the United States, Mexico, Canada, and Colombia. It offers truckload services; domestic and international freight forwarding, customs brokerage services; and final mile and ground expedite services.
ULH’s forward EV/Sales multiple of 0.65 is 60.2% lower than the industry average of 1.62. Its forward EV/EBITDA multiple of 4.44 is 57.9% lower than the industry average of 10.56.
ULH’s trailing-12-month ROTC of 16.97% is 140.6% higher than the industry average of 7.05%. Its trailing-12-month asset turnover ratio of 1.72% is 114.4% higher than the industry average of 0.80%.
For the fiscal fourth quarter that ended December 31, 2022, ULH’s income from operation increased 102.6% year-over-year to $48.17 million, while its net income increased 106.5% year-over-year to $33.45 million. Furthermore, its EPS came in at $1.27, representing a 111.7% increase from the prior-year quarter.
ULH’s revenue is expected to increase by 3.8% year-over-year to $1.92 billion in 2024. Its EPS is expected to grow 31.2% year-over-year to $5.55 in 2024. It surpassed the EPS estimates in three of four the trailing quarters. The stock gained 57.2% over the past year to close the last trading session at $29.19.
ULH’s POWR Ratings reflect this positive outlook. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
In addition, ULH has an A grade for Value and a B for Momentum. It is ranked #2 in the same industry. Click here to see ULH ratings for Growth, Stability, Sentiment, and Quality.
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FDX shares were unchanged in premarket trading Thursday. Year-to-date, FDX has gained 33.24%, versus a 7.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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