Buy 5 Transportation Services Stocks on Strong Demand
The diversified transportation sector, which includes airline operators, railroads, truckers and shippers, to name a few, performed well in the first half of 2018. Strong U.S. macro-economic fundamentals, substantial surge in manufactured and retail goods along with improving global economic conditions is anticipated to fuel the transportation sector’s growth.
Consequently, companies offering equipment financing and leasing, logistics and supply chain management services to transporters have also rebounded in 2018. At this stage, investment in transportation services stocks with a favorable Zacks Rank will be a prudent move.
Growth Inducing Polices
As the U.S. economy continues to grow, demand for carriage is also increasing and this momentum is anticipated to sustain in the rest of 2018. The two pro-growth agendas of Trump, namely, significant cut in corporate tax and deregulation are major catalysts to the transportation sector.
Massive reduction in corporate taxes from 35% to 21% has brought corporate tax rate to its lowest level in 78 years. A large part of transporters book much of their revenues within the United States. Consequently, a significant reduction in corporate tax rate faced by these companies would be immediately accretive to cash flow.
Strong U.S. Economic Fundamentals
U.S. GDP grew at 4.1% in the second-quarter of 2018, marking its highest gain since the third quarter of 2014 and the third-best growth rate since the Great Recession of 2008-2009.
In the second-quarter, consumer spending increased 4%, business investment grew 7.3% and government spending rose 3.5%. Notably, first-quarter 2018 GDP growth rate was revised to 2.2% from 2% reported earlier.
Unemployment rate in July fell 0.1% from June to 3.9%, its lowest level in nearly 50 years. Average hourly earnings increased by 0.3% to 2.7% over the same period a year ago, reducing investor’s fear of a hyper-inflation.
For July, the Conference Board's measure of U.S. consumer confidence index is pegged at 127.4 compared with June’s revised reading of 127.1. July’s reading was also better than the consensus estimate of 126.3.
Out Top Picks
A robust U.S. economy, healthy consumer and business confidence, massive tax haul and business friendly policies of the government are anticipated to propel transportation sector’s growth. This key sector (one of the top 16 Zacks sectors) is likely to end 2018 on a triumphant note. Consequently, growth potential of transportation services stocks make them lucrative.
We narrowed down our choice to five stocks with strong growth potential. Each of these stocks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below depicts price performance of our five picks in the last three months.
Echo Global Logistics Inc. ECHO is a leading provider of technology enabled transportation and supply chain management services. It sports a Zacks Rank #1. The company has expected earnings growth of 93% for current year. The Zacks Consensus Estimate for the current year has improved by 12.9% over the last 30 days.
Matson Inc. MATX offers shipping logistics services in Hawaii, Guam, and Micronesia islands and expedited service from China to southern California. It flaunts a Zacks Rank #1. The company has expected earnings growth of 31.5% for current year. The Zacks Consensus Estimate for the current year has improved by 5.9% over the last 30 days.
Trinity Industries Inc. TRN provides various products and services to the transportation, energy, chemical, agriculture and construction sectors in the United States and internationally. It carries a Zacks Rank #1. The company has expected earnings growth of 2.6% for current year. The Zacks Consensus Estimate for the current year has improved by 12.2% over the last 30 days.
GATX Corp. GATX is unique railcar finance and leasing company combining asset knowledge and services, structuring expertise, creative partnering and risk capital to serve customers. It carries a Zacks Rank #2. The company has expected earnings growth of 6.2% for current year. The Zacks Consensus Estimate for the current year has improved by 6.2% over the last 30 days.
Triton International Ltd. TRTN offers acquisition, leasing, re-leasing, and sale of intermodal containers. It has a Zacks Rank #2. The company has expected earnings growth of 55% for current year. The Zacks Consensus Estimate for the current year has improved by 3.1% over the last 30 days.
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