By Philip van Doorn
There are always special circumstances, such as the airline industry’s recovery and ever-building demand for package delivery services
The Dow Jones Transportation Average has long been considered a good forward indicator of the direction of the U.S. economy. With early signs that an economic slowdown is coming, this might be an obvious portion of the stock market to avoid.
Then again, this group of 20 stocks includes four that are both expected to be profitable this year and grow earnings at a double-digit pace through 2024. It also includes some bargain stocks, especially if you believe the dark days of the pandemic are behind us.
The transportation warning
First, here’s a chart showing total returns (with dividend reinvested) for the Dow Jones Transportation Average , the Dow Jones Industrial Average and the S&P 500 this year through April 14:
The Dow Transports have been bringing up the rear. Following a 5% drop for the Dow Transports on April 1, a day when the Dow Jones Industrial Average and the S&P 500 were up, Mark Hulbert called the action a “bad omen.” He cited government data correlating poor performance among transportation stocks with economic slowdowns over succeeding months.
Along with this year’s weak showing for the Dow Transports, consumer and wholesale price increases were at 40-year highs in March, and the Federal Reserve is expected to accelerate its interest-rate increases and begin reducing its bond holdings soon to counter inflation. Rising rates have given home builders the jitters, and it remains to be seen if the Fed’s moves will cause a recession or lead to a “soft landing” for the economy.
The case for (some of the) Dow Transports
To screen the Dow Jones Transportation Average, we began with the entire list of 20 stocks and consensus 2022 estimates for earnings per share, among analysts polled by FactSet. A baseline of 2022 may be more useful than a 2021 starting point, because of the pandemic-induced turmoil for airlines and the supply squeezes that affected other industries.
Here are the 20 stocks in the Dow Jones Transportation Average, sorted by industry and then alphabetically, with projected compound annual growth rates (CAGR) for earnings per share through 2024:
Company Ticker Industry Estimated EPS -- 2022 Estimated EPS -- 2023 Estimated EPS -- 2024 Two-year estimated EPS CAGR Price/ 2024 EPS estimate C.H. Robinson Worldwide Inc. CHRW Air Freight/ Couriers $6.35 $5.78 $5.95 -3.2% 17.4 Expeditors International of Washington Inc. EXPD Air Freight/ Couriers $6.99 $5.87 $5.57 -10.8% 17.4 FedEx Corp. FDX Air Freight/ Couriers $21.72 $23.87 $25.84 9.1% 8.0 United Parcel Service Inc. Class B UPS Air Freight/ Couriers $12.78 $13.40 $13.76 3.8% 13.7 Alaska Air Group Inc. ALK Airlines $3.00 $6.23 $8.28 66.3% 6.9 American Airlines Group Inc. AAL Airlines -$3.44 $1.57 $3.63 N/A 5.2 Delta Air Lines Inc. DAL Airlines $2.53 $5.83 $7.25 69.4% 5.8 JetBlue Airways Corp. JBLU Airlines -$0.49 $1.28 $2.14 N/A 6.0 Southwest Airlines Co. LUV Airlines $1.13 $3.11 $4.28 94.6% 10.9 United Airlines Holdings Inc. UAL Airlines -$2.52 $6.26 $8.80 N/A 5.1 Avis Budget Group Inc. CAR Rental/ Leasing $22.55 $15.93 $14.82 -18.9% 17.9 Ryder System Inc. R Rental/ Leasing $11.60 $10.17 $11.75 0.7% 5.4 Kirby Corp. KEX Marine Shipping $2.11 $3.39 $4.46 45.3% 14.9 Matson Inc. MATX Marine Shipping $26.11 $11.21 $6.31 -50.8% 13.9 CSX Corp. Railroads $1.79 $1.96 $2.15 9.6% 16.3 Norfolk Southern Corp. NSC Railroads $13.82 $15.27 $16.50 9.3% 15.9 Union Pacific Corp. UNP Railroads $11.65 $12.96 $13.93 9.3% 17.7 J.B. Hunt Transport Services Inc. JBHT Trucking $8.84 $9.75 $10.35 8.2% 16.6 Landstar System Inc. LSTR Trucking $11.08 $9.49 $9.54 -7.2% 15.2 Old Dominion Freight Line Inc. ODFL Trucking $11.01 $12.06 $12.80 7.8% 20.7 Source: FactSet
Click on the tickers for more about each company.
Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
The estimates are for calendar years, because some companies have fiscal years that don’t match the calendar. For example, FedEx Corp.’s fiscal year ends on May 31.
Some notes about the data:
Any stock screen has its limitations and should only serve as a starting point for your own research.
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-Philip van Doorn
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