With a post-pandemic economic boom expected, transportation stocks are a great way to take advantage of consumer spending
After a rough 2020, the country is opening back up. And consumers are in a post-pandemic spending mood. Economists are predicting we are entering a boom, with 2021 on track to deliver the strongest economic growth since 1984. One way for investors to take advantage of this opportunity is to buy shares in companies whose products will benefit from an explosion in consumer demand. Another way is to take advantage of the surge in demand from a broader perspective. Investing in transportation stocks.
We’re already seeing strong indicators that demand for transportation services is going through the roof. Container ships are piled up offshore, waiting to unload at the port of Los Angeles. Meanwhile, trucking companies can’t hire drivers fast enough. There have been other factors at play — including the six-day blockage of the Suez Canal — but rising demand is the overall theme. Each of these seven transportation stocks is positioned to take advantage of economic growth.
- Canadian Pacific Railway Ltd (NYSE:CP)
- FedEx (NYSE:FDX)
- Forward Air (NASDAQ:FWRD)
- Landstar Systems (NASDAQ:LSTR)
- Matson (NYSE:MATX)
- Saia (NASDAQ:SAIA)
- United Parcel Service (NYSE:UPS)
Adding any of these transportation stocks to your portfolio will let you reap the rewards of moving goods as the economy opens up.
Transportation Stocks: Canadian Pacific Railway (CP)
Canada is an expansive country, with relatively few large population centers — most concentrated near the U.S. border. Canada’s exports are largely bulky raw materials, while it imports manufactured goods. The combination makes railways critical for economical transportation. Canadian Pacific Railway is one of the country’s oldest, largest and most important. Operating since 1881, CP-owned tracks serve much of Canada, as well as the mideast United States. According to CP, its network includes seven ports and over 13,000 miles of track.
Over the past five years, CP stock has delivered a healthy 206% return. That rate of growth has accelerated over the past year. As the economy continues to recover then grow, demand for CP’s services should keep this transportation stock on that solid growth trajectory.
At time of writing, CP stock was rated ‘B’ in Portfolio Grader.
FedEx (FDX)
Once of the big stories of the pandemic has been the rise of online shopping. Delivering all those packages has pushed delivery companies to the limit, including FedEx. During the worst of the pandemic, that was actually a negative for the company. FedEx reported full-year 2020 revenue was down over 2% and 2019’s diluted EPS of $5.01 turned into a $1.28 per share loss last year.
However, that downturn was attributable to pandemic-specific factors. Among them, a dramatic decline in commercial shipments, while residential deliveries spiked. This required rapid expansion of residential delivery capabilities. It also meant big costs for protective equipment for drivers — to the tune of $125 million in Q4 alone. In addition, many FedEx retail locations were forced to close during lockdowns.
2021 should see still see strong residential deliveries along with a big increase in commercial shipments. Add in declining pandemic-related costs, and that’s recipe for growth for FDX stock.
FDX stock is currently rated ‘A’ in Portfolio Grader.
Transportation Stocks: Forward Air (FWRD)
Tennessee-based Forward Air is a high-flying transport stock that has posted a gain of 27% so far in 2021. Over the past five years, the growth rate amounts to over 114%. Forward Air operates 90 facilities located near U.S. and Canadian airports with 12 regional centers. The company’s wide distribution network facilitates its specialty of expedited ground services.
As the demand for expedited — but cheaper than air delivery — ground transport rises, Forward Air has seen its business grow as well. In the fourth quarter of 2020, FWRD reported record revenue. The company is adding to its network capacity through acquisitions and also experiencing strong organic growth. In Q1 Forward Air delivered for investors again, beating revenue and earnings estimates, doubling its EPS YoY to 60 cents.
The current Portfolio Grader rating for FWRD stock is ‘B.’
Landstar Systems (LSTR)
Florida’s Landstar Systems describes itself as an “asset light” provider of integrated transport management solutions. What does this mean, exactly? Landstar offers truck-based freight shipping through the U.S., as well as parts of Canada and Mexico. And it does so primarily by using a network of 10,000 owner/operators. These drivers accept loads and do the hauling using their own rigs.
This model means Landstar may not generate the same revenue per load that other transportation stocks do, but the company has a fraction of the capital, fuel and maintenance costs. The owner/operators cover that. LSTR stock has posted growth of 28% so far in 2021, and with good reason. When the company reported its first-quarter results, revenue of $1.29 billion was a quarterly record — up 39% year over year and blowing past guidance. In addition, diluted EPS of $2.01 set an all-time quarterly record.
The company’s CEO is bullish on what the rest of 2021 holds for Landstar Systems: “Given the exceptional performance by Landstar in the 2021 first quarter, I believe the stage has now been set for what should be a record-setting year.”
LSTR stock currently earns a ‘B’ rating in Portfolio Grader.
Transportation Stocks: Matson (MATX)
This American container shipping company serves Hawaii, Alaska and Pacific countries including Japan and China. Matson has been at this for a long time — since 1882. In addition to containers, the company’s shipping fleet is equipped to transport vehicles. Its new Kanaloa class ships (which operate on a route between Hawaii and California) can carry 500 vehicles in an enclosed garage. Matson also has a thriving business in cross-Pacific personal moving and car shipments.
Its Matson Logistics subsidiary supplements container shipping with North American supply chain support with customs brokerage, warehousing, and truck/rail services for manufacturers, retailers and distributors.
With the pandemic winding down and the trade war with China seemingly on pause, container shipments from China have exploded. In Q1, Matson reported container volume from that country up 218.6% YoY. MATX stock is up 14% in 2021, but that could be just the start. In the aftermath of the 2008 recession, MATX stock put together a run of over 500% in six years as consumer spending recovered, driving up shipments from China. So long as the trade war doesn’t escalate, investors could see a similar pattern in the post-pandemic economic boom.
MATX stock currently rates a Total Grade of ‘B’ in Portfolio Grader.
Saia (SAIA)
Saia is a freight company specializing in LTL (less than truckload) services across North America, Hawaii, and Puerto Rico. The company also operates 3PL services (full-service third party logistics). With a network of 169 terminals, Saia currently processes over 26,000 shipments daily.
Despite severe winter weather that forced the company to close or limit operations of 70 of its terminals for several days, Saia still reported all-time record quarterly revenue in Q1. SAIA stock has been a stellar performer among transportation stocks over the past five years. It has posted growth of 796% during that time.
At the time of writing, SAIA stock’s rating in Portfolio Grader was ‘B.’
Transportation Stocks: UPS (UPS)
Finally, a transportation stock that everyone knows. With online shopping the preferred way to buy products during the pandemic, those brown UPS vans were everywhere.
In its first quarter, UPS beat Wall Street estimates, delivering revenue of $22.9 billion. That’s up 27% compared to last year. That news propelled UPS stock to a single-day 10% gain in April. UPS stock growth had been very modest for most of the past five years. However, since the 2020 market crash, it’s now up 138%.
With online shopping expected to remain popular even as brick and mortar stores re-open, it’s expected that UPS drivers will continue to be busy. And UPS shares should continue to deliver solid returns for investors looking to add transportation stocks to their portfolio.
The current Portfolio Grader rating for UPS stock is ‘A.’
Note: This article originally appeared at InvestorPlace.
On the date of publication, Louis Navellier had a long position in MATX. Louis did not have (either directly or indirectly) any other positions in the securities mentioned in this article. InvestorPlace Research Staff member primarily responsible for this article did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
