In this article, we discuss 11 cheap transportation stocks to invest in. If you want to skip our detailed discussion on the transportation industry, head directly to 5 Cheap Transportation Stocks To Buy.
Previously, we reported that the International Air Transport Association (IATA) is optimistic about the global airline industry. IATA also predicted that airlines will achieve a combined net profit of $4.7 billion in 2023, marking the first positive season since the pandemic took over in 2020. IATA's data shows that passenger levels will return to pre-pandemic levels in 2024, reaching approximately 5.2 billion passengers. In 2022, the airline industry suffered losses of $6.9 billion, which was lower than the priorly forecasted $9.7 billion loss in June. IATA's chief economist, Marie Owens Thomsen, described the industry's financial results as "phenomenal." Additionally, shipping rates, which were high during the challenges posed by the COVID-19 pandemic, have now declined, leading some experts to label it a "freight recession." This situation has put the shipping freight sector at a disadvantage during annual contract negotiations, but it benefits retailers and other customers by providing lower transportation costs.
The ongoing freight slowdown is evident in data and activity as of April 2023. A survey conducted by CNBC on supply chain factors, such as inventories and warehouse space, indicates a reduction in truck movements in and out of warehouses. This decline, paired with a 40% drop in manufacturing orders, suggests a decrease in freight transportation via both trucks and railways. Data from FreightWaves SONAR, the provider of CNBC Supply Chain Heat Map, further illustrates the weakness in the sector. Year-over-year comparisons of current ocean freight orders departing from worldwide ports and arriving at ports in the United States show a significant decline, reaching half of previous levels. This decrease affects both rail and road transportation, resulting in reduced freight entering the country.
On a positive note, electric vehicles are making huge waves in the transportation industry. Currently, the diesel-powered trucking industry handles a significant majority of freight, up to 70% in the U.S. alone. According to a recent CNBC report, Swedish EV trucking startup Einride has successfully competed with Tesla and its Semi by attracting prominent corporate clients. Both companies, Einride and Tesla, have secured deals with PepsiCo — Einride in the U.K. and Tesla in California. Although some deals are initially limited in scope, Einride's founder and CEO, Robert Falck, believes that the economic rationale already exists for a significant portion of the freight industry, potentially up to half, to shift from diesel to electric. Robert Falck observed that in various markets, regardless of short-term fluctuations in diesel prices, electric vehicles are proving to be a more cost-effective option for trucking, although this is influenced by the electricity costs. As the cost of trucking hardware decreases and becomes more widely available, the argument for transitioning to EVs will solidify. In a CNBC interview dated May 11, Falck said:
“In the $4 trillion freight mobility space, between 40%-50% should be electric driven by the business case today. That means a $2 trillion opportunity already today.”
Investors looking for gains in the transportation industry can pick up cheap or undervalued transportation stocks like Norfolk Southern Corporation (NYSE:NSC), Canadian National Railway Company (NYSE:CNI), and Union Pacific Corporation (NYSE:UNP).
Our Methodology
We selected the following cheap transportation stocks with trailing P/E ratios lower than the industry's trailing P/E ratio of 23.85 and then sorted the list based on the hedge fund sentiment toward each stock. We have assessed the hedge fund sentiment from Insider Monkey’s database of 943 elite hedge funds tracked as of the end of the first quarter of 2023. The list is arranged in ascending order of the trailing P/E ratio.
American Airlines Group Inc. (NASDAQ:AAL) operates as a network air carrier. The company was founded in 1926 and is headquartered in Fort Worth, Texas. On April 27, American Airlines Group Inc. (NASDAQ:AAL) reported a Q1 non-GAAP EPS of $0.05, beating market consensus by $0.02. The revenue increased 37.1% year-over-year to $12.2 billion, in line with Wall Street estimates. American Airlines Group Inc. (NASDAQ:AAL) predicts that its adjusted earnings per diluted share for the second quarter of 2023 will range from $1.20 to $1.40, taking into account demand trends and the current fuel price forecast. This estimate is higher than the expected consensus of $1.04. The airline also maintained its previous projection for the full year 2023, with adjusted earnings per diluted share anticipated to fall between $2.50 and $3.50, exceeding the consensus estimate of $2.35.
According to Insider Monkey’s first quarter database, American Airlines Group Inc. (NASDAQ:AAL) was part of 36 hedge fund portfolios, compared to 31 in the prior quarter. D E Shaw is a prominent stakeholder of the company, with 13 million shares worth $192 million.
In addition to Norfolk Southern Corporation (NYSE:NSC), Canadian National Railway Company (NYSE:CNI), and Union Pacific Corporation (NYSE:UNP), American Airlines Group Inc. (NASDAQ:AAL) is one of the best cheap transportation stocks to buy.
United Airlines Holdings, Inc. (NASDAQ:UAL) offers air transportation services across North America, Asia, Europe, Africa, the Pacific, the Middle East, and Latin America. The company operates both mainline and regional fleets to transport passengers and cargo. United Airlines Holdings, Inc. (NASDAQ:UAL) is one of the best cheap transportation stocks to buy. The company reported a Q1 non-GAAP EPS of -$0.63, topping Wall Street estimates by $0.10. The revenue increased 51% year-over-year to $11.43 billion, falling in line with market consensus. United Airlines Holdings, Inc. (NASDAQ:UAL) also reiterated a full-year adjusted diluted EPS target of $10 to $12.
According to Insider Monkey’s first quarter database, 40 hedge funds were long United Airlines Holdings, Inc. (NASDAQ:UAL), compared to 35 funds in the prior quarter. Thomas E. Claugus’ GMT Capital is a prominent stakeholder of the company, with a position worth $98 million.
Delta Air Lines, Inc. (NYSE:DAL) is involved in the scheduled air transportation services for both passengers and cargo, operating within the United States and globally. The company is divided into two segments – Airline and Refinery. It is one of the best cheap transportation stocks to buy. On July 13, Delta Air Lines, Inc. (NYSE:DAL) reported a Q2 non-GAAP EPS of $2.68 and a revenue of $15.58 billion, outperforming Wall Street estimates by $0.29 and $120 million, respectively. The company anticipates that its earnings per share (EPS) for the third quarter will fall within the range of $2.20 to $2.50, exceeding the consensus estimate of $2.05. Furthermore, for the full year 2023, the company forecasts its EPS to be in the range of $6 to $7, compared to the consensus estimate of $6.19.
According to Insider Monkey’s first quarter database, 56 hedge funds were bullish on Delta Air Lines, Inc. (NYSE:DAL), compared to 51 funds in the prior quarter. Ken Griffin’s Citadel Investment Group is a prominent stakeholder of the company, with 5.5 million shares worth $193.3 million.
Here is what Miller Value Partners specifically said about Delta Air Lines, Inc. (NYSE:DAL) in its Q3 2022 investor letter:
“Delta Air Lines, Inc. (NYSE:DAL) ($29.42) is a high-quality airline (yes, there really is such a thing!). It didn’t issue any equity in the pandemic. It focuses on delivering a superb customer experience and has brand loyalty (including a stable revenue stream from partner American Express, growing at 20%/ year). Maybe the best evidence: it’s managed to outperform the S&P 500 over the past decade despite a horrible pandemic ending point (+13.2% vs. 11.7%1 ). It trades for 4x 2024 earnings! If it eventually trades at Southwest’s historical valuation, it implies this stock should double as well.”
8. Knight-Swift Transportation Holdings Inc. (NYSE:KNX)
Number of Hedge Fund Holders: 32
Trailing P/E Ratio: 13.11
Knight-Swift Transportation Holdings Inc. (NYSE:KNX) offers freight transportation services within the United States and Mexico. The company is divided into four segments – Truckload, Less-than-truckload (LTL), Logistics, and Intermodal. Knight-Swift Transportation Holdings Inc. (NYSE:KNX) is one of the best cheap transportation stocks to invest in. On April 20, the company reported a Q1 non-GAAP EPS of $0.73, falling short of Wall Street estimates by $0.08. On the other hand, the revenue of $1.64 billion exceeded market consensus by $30 million.
According to Insider Monkey’s first quarter database, 32 hedge funds were bullish on Knight-Swift Transportation Holdings Inc. (NYSE:KNX), compared to 34 funds in the prior quarter. Ben Jacobs’ Anomaly Capital Management is the largest stakeholder of the company, with 1.8 million shares worth $105.3 million.
CSX Corporation (NASDAQ:CSX) specializes in providing rail-based freight transportation services. The company's offerings include rail services, transportation of intermodal containers and trailers, rail-to-truck transfers, and bulk commodity operations. It is one of the best cheap transportation stocks to invest in. On July 12, CSX Corporation (NASDAQ:CSX) declared a quarterly dividend of $0.11 per share, in line with previous. The dividend is payable on September 15, to shareholders of record on August 31.
According to Insider Monkey’s first quarter database, 61 hedge funds were bullish on CSX Corporation (NASDAQ:CSX), compared to 66 funds in the prior quarter. Eric W. Mandelblatt’s Soroban Capital Partners is the largest stakeholder of the company, with 52.5 million shares worth $1.5 billion.
Here is what ClearBridge Investments Global Infrastructure Value Strategy has to say about CSX Corporation (NYSE:CSX) in its Q4 2021 investor letter:
“On a regional basis, the U.S. and Canada were the top contributors to quarterly performance, of which U.S. rail operator CSX was among the lead performers. CSX is one of five leading North American rail companies, with over 21,000 miles of rail, covering 23 states and 40+ ports. CSX is engaged in the transportation of rail freight in the Southeast, East, and Midwest via interchange with other rail carriers, to and from the rest of the U.S. and Canada. CSX performed well during the quarter after the company beat market expectations on its third-quarter results. The beats were largely driven by strong pricing, which could be hitting record highs, and healthy commodity/coal volume driven by the current energy crisis.”
FedEx Corporation (NYSE:FDX) is a multinational company that offers transportation, e-commerce, and business services worldwide. Its FedEx Express segment provides express transportation, small-package ground delivery, freight transportation services, and technology solutions for e-commerce transportation. On June 20, FedEx Corporation (NYSE:FDX) reported a Q4 non-GAAP EPS of $4.94, beating market estimates by $0.07. However, the revenue of $21.9 billion fell short of Wall Street consensus by $760 million. During fiscal 2023, the company bought back more than 9 million shares, which represents approximately 4% of the shares that were outstanding at the beginning of the year. As of May 31, 2023, there is still $2.6 billion available under the current share repurchase authorization.
According to Insider Monkey’s first quarter database, 55 hedge funds were bullish on FedEx Corporation (NYSE:FDX), compared to 48 funds in the prior quarter. Ken Griffin’s Citadel Investment Group is the biggest stakeholder of the company, with 2 million shares worth $467.2 million.
Like Norfolk Southern Corporation (NYSE:NSC), Canadian National Railway Company (NYSE:CNI), and Union Pacific Corporation (NYSE:UNP), FedEx Corporation (NYSE:FDX) is one of the top cheap transportation stocks to watch.
Artisan Value Fund made the following comment about FedEx Corporation (NYSE:FDX) in its Q1 2023 investor letter:
“After bottoming in September 2022 at less than 8X our estimate of normalized earnings, shares of FedEx Corporation (NYSE:FDX), a global shipping and logistics firm, have rallied strongly over the past six months. The demand environment remains challenging, particularly in the Express segment due to lower volumes in Asia and Europe. A key question remains how much the demand slowdown is idiosyncratic due to the post-pandemic reopening of the international economy and therefore less likely to repeat and how much is due to a cyclical slowdown. Due to the substantial pessimism already priced into shares, it hasn’t taken much for shares to rise soundly. Better-than-expected operating results and progress on cost-cutting initiatives, including additional headcount reductions, to offset cost pressures were well-received. While operating results can be choppy, FedEx’s longer term business economics are highly favorable given the global shipping industry’s consolidated structure and massive barriers to entry that afford operators with pricing power to counter cost inflation and earn respectable returns on capital over the business cycle.”
