The Zacks Transportation - Equipment and Leasing industry is currently navigating a challenging macroeconomic environment. The industry grapples with challenges due to persistent inflation, tariff-related tensions and lingering supply-chain disruptions. Geopolitical woes represent further challenges.
Despite the challenging macroeconomic conditions, industry players such as Wabtec Corporation (WAB), Ryder System (R) and Air Lease Corporation (AL) stand out for their solid investor-friendly steps. Notably, consistent shareholder-friendly initiatives in the form of dividend payouts or share buybacks imply solid financial strength of companies in the Equipment and Leasing industry. Such moves boost investors’ confidence and positively impact the bottom line.
Industry Overview
The Zacks Transportation - Equipment and Leasing industry includes companies offering equipment financing as well as leasing and supply-chain management services. The industry includes aircraft, railcar and intermodal container lessors. Some of these companies even provide logistics and transportation solutions, such as vehicles, drivers, management and administrative services. Most industry participants offer fleet management solutions and serve customers, varying from small businesses to large international enterprises. Customers range from a wide variety of industries, the most significant being automotive, electronics, transportation, grocery, lumber and wood products, food service and home furnishing. A few of these companies provide locomotives and technology-based equipment, systems and services to freight rail and passenger transit industries.
Factors Deciding the Industry's Outlook
Strong Financial Returns for Shareholders: With economic activities gaining pace from the pandemic lows, more and more companies are allocating their increasing cash pile through dividends and buybacks to pacify long-suffering shareholders. This underlines their financial strength and confidence in the business. Among the Transportation – Equipment and Leasing industry players, Wabtec (on Feb. 7, 2025) announced a 25% dividend increase, thereby raising its quarterly cash dividend from 20 cents per share to 25 cents.
Economic Uncertainty Remains: Tariff tensions are heating up, with new tariffs levied by the U.S. federal government, which has impacted the United States’ biggest trading partners — Canada, Mexico and China. With retaliatory tariffs against the United States, trade tensions are escalating. These tariff-induced economic uncertainties do not bode well for industry participants. With inflation remaining a concern, risks associated with an economic slowdown and geopolitical tensions dampen the prospects of stocks belonging to this industrial cohort. Sluggish economic growth and inflationary woes are likely to make markets more volatile in the coming days. Rising economic uncertainty does not bode well for industry players.
Supply-Chain Disruptions & High Costs: Although economic activities picked up from the pandemic gloom, supply-chain disruptions continue to dent stocks in the industry. Increased operating costs are also limiting bottom-line growth. Due to supply-chain troubles, costs will likely continue to be steep going forward.
Zacks Industry Rank Indicates Gloomy Prospects
The Zacks Railroad industry, housed within the broader Transportation sector, currently carries a Zacks Industry Rank #182. This rank places it in the bottom 26% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates bleak near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The sell-side analysts covering the companies in this industry have been decreasing their estimates. Over the past year, the industry’s consensus earnings estimate for the current year has decreased 46.9%.
Before we present a few stocks that investors can retain, given their growth prospects, let’s take a look at the industry’s recent stock market performance and current valuation.
Industry Underperforms S&P 500 & Sector
The Zacks Transportation - Equipment and Leasing industry has outperformed the Zacks S&P 500 Composite as well as the broader sector over the past year.
Over this period, the industry has declined 36.5% compared with the S&P 500 Index’s soutthward movement of 2% and the broader sector’s loss of 26.4%.
The Zacks Transportation - Equipment and Leasing industry has outperformed the Zacks S&P 500 Composite as well as the broader sector over the past year.
Over this period, the industry has declined 36.5% compared with the S&P 500 Index's southward movement of 2% and the broader sector's loss of 26.4%.
One-Year Price Comparison
Industry's Current Valuation
On the basis of the forward 12-month price-to-earnings (P/E- F12M), a commonly used multiple for valuing equipment and leasing stocks, the industry is currently trading at 11.43X, compared with the S&P 500’s 18.58X. It is also below the sector’s P/E (F12) ratio of 11.87X.
Over the past five years, the industry has traded as high as 17.59X, as low as 10.25X and at the median of 13.81X, as the chart below shows.
On the basis of the forward 12-month price-to-earnings (P/E- F12M), a commonly used multiple for valuing equipment and leasing stocks, the industry is currently trading at 11.43X, lower than the S&P 500’s 18.58X. It is also below the sector’s P/E (F12) of 11.87X.
Over the past five years, the industry has traded as high as 17.59X, as low as 10.25X, with a median of 13.81X.
P/E Ratio (Forward 12-Month)
3 Transport Equipment Leasing Stocks to Watch Now
We are presenting three Zacks Rank #3 (Hold) stocks that are well-positioned to grow in the near term. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Wabtec: This Pittsburgh, PA-based company offers technology-based locomotives, equipment, systems, and services for the freight rail and passenger transit industries worldwide. With WAB’s financial health being linked directly to the global economy, the improving global rail supply market in the post-COVID scenario is a positive for the company. Focus on new technologies to improve safety and reliability, together with its restructuring actions and cost-cutting actions, are the main drivers of its strength lately. Its strong free cash flow generating ability ensures continuity in its dividend payments and share buybacks.
WAB has an impressive earnings surprise history. The company's earnings outpaced the Zacks Consensus Estimate in three of the trailing four quarters (missed the mark in the remaining quarter), delivering an average surprise of 9.22%.
The Zacks Consensus Estimate for WAB’s 2025 earnings has been revised 2% upward over the past 60 days. WAB has an expected earnings growth rate of 9.7% for 2025.
Price and Consensus: WAB
R: Headquartered in Miami, FL, Ryder operates as a logistics and transportation company worldwide. Ryder’s consistent efforts to reward its shareholders through dividends and buybacks are appreciative. Notably, Ryder has been making uninterrupted dividend payments for more than 48 years.Ryder's cost-cutting initiatives in response to the weak freight market conditions are also commendable.
Ryder has an impressive earnings surprise history. The company's earnings outpaced the Zacks Consensus Estimate in each of the trailing four quarters, delivering an average surprise of 9.7%.
The Zacks Consensus Estimate for R’s 2025 earnings has been revised 1.3% upward over the past 60 days. R has an expected earnings growth rate of 13% for 2025.
Price and Consensus: R
AL: Headquartered in Los Angeles, CA, Air Lease operates as an aircraft leasing company engaged in purchasing and leasing commercial jet aircraft to airlines worldwide.
With a globally diversified customer base of 116 airlines in 58 different countries, more than 95% of AL’s business revenues originate from airlines located outside of the United States. Steady growth in the fleet, profits earned from aircraft sales and higher end-of-lease revenues contribute to AL's top-line growth. Consistent shareholder-friendly moves, such as dividend payments, look encouraging and positively impact the company's bottom line.
AL’s earnings outpaced the Zacks Consensus Estimate in two of the trailing four quarters and missed the mark in the remaining two quarters, delivering an average miss of 3.31%.
The Zacks Consensus Estimate for AL’s 2025 earnings has moved up 1% over the past 60 days. AL’s expected earnings growth rate for 2025 is 6.8%.
Price and Consensus: AL
On the basis of the forward 12-month price-to-earnings (P/E- F12M), a commonly used multiple for valuing equipment and leasing stocks, the industry is currently trading at 11.43X, compared with the S&P 500’s 18.58X. It is also below the sector’s P/E (F12) ratio of 11.87X.
Over the past five years, the industry has traded as high as 17.59X, as low as 10.25X and at the median of 13.81X, as the chart below shows.
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