At first glance, the concept of transportation stocks to buy might seem odd if not outright precarious. With the underlying ecosystem dependent on economic stability, concerns about a possible recession on the horizon present a dour framework. Still, investors may want to keep an open mind before making their decision.
First off, the experts calling for a downturn might be incorrect. While it might seem illogical to many that the Federal Reserve can simply engineer a soft landing after an awful pandemic, it’s not an entirely impossible prospect. Also, traders could simply speculate on a reversal in transportation stocks. Another factor to keep in mind is that the industry may represent a forward indicator. Sure, individual ideas in the space might not look so hot right now.
However, if a turnaround materializes, that could help lift many other sectors. Basically, this sector is where the economic rubber meets the road. With that, below are transportation stocks to buy for intrepid contrarians.
One of the top names among transportation stocks, Knight-Swift Transportation (NYSE:KNX) is the fifth-largest trucking company in the U.S. In better or more predictable circumstances, KNX would be a solid wager. However, the underlying trucking industry suffered a huge crisis this year; namely, a significant shortage of freight. And that has led to a domino effect, impacting everything from job stability to consumer prices.
To be perfectly blunt, KNX doesn’t immediately appear as one of the transportation stocks to buy. Since the January opener, shares suffered a loss of more than 6%. In the trailing month, KNX dipped nearly 10%. Still, it might not be time to hit the panic button. Looking at the financials, Knight posts a solid three-year revenue growth rate of 17.4%, above 76.64% of its peers. Also, despite challenges, it remains a consistently profitable business.
Even more encouraging, analysts rate KNX a moderate buy with a $59.47 price target, implying over 19% upside.
Union Pacific (UNP)
United Pacific (UNP) switch on tracks near Kansas City.
Source: Michael Rosebrock / Shutterstock.com
A publicly traded railroad holding company, Union Pacific (NYSE:UNP) is a vital cog in national infrastructure. Obviously, Union plays a massive role in commerce and overall economic viability. So, it’s not the most encouraging look to see UNP slip about 2% since the beginning of the year. What’s more, in the trailing month, UNP shed nearly 9% of its equity value.
Still, it could be one of the transportation stocks to buy. As evidence, I turn to Fintel’s options flow screener, which exclusively targets big block trades likely made by institutions. First, for options expiring in late 2023/early 2024, the net sentiment appears bullish.
Second, on Aug. 16, an institutional trader apparently sold (wrote) 10,002 contracts of the Oct 20 ’23 205.00 Put, collecting a premium of $2 million in the process. Also, this premium represents 4.63 standard deviations above the mean, which is significant. Basically, major traders believe that a floor may materialize around the $205 price. Adding to the sentiment, analysts peg UNP as a moderate buy with a $252.50 target, implying nearly 24% growth.
Eagle Bulk Shipping (EGLE)
a cargo ship in the middle of the ocean representing TOPS stock
Source: VladSV / Shutterstock.com
Headquartered in Stamford, Connecticut, Eagle Bulk Shipping (NYSE:EGLE) is a fully integrated shipowner-operator engaged in the global transportation of dry bulk commodities. Per its website, Eagle focuses exclusively on the mid-size dry bulk vessel segment and owns one of the largest fleets of Supramax/Ultramax ships in the world. Since the start of the year, EGLE fell nearly 14%.
Still, that loss isn’t as bad as it may look on paper. Basically, EGLE has been at parity since early May. And should global economic conditions pick up – or at least not collapse – Eagle Bulk could perform surprisingly well. For example, the company prints a three-year revenue growth rate of 15.4%, above 73.58% of its peers.
Also, during the same period, its EBITDA growth pinged at 56.9%, above 88% of sector rivals. For those willing to take a shot, EGLE trades at a lowly forward earnings multiple of 5.97x. To close, analysts peg EGLE a consensus strong buy with a $60 target, implying 43% upside potential. Thus, it could be an enticing idea for transportation stocks.
On the date of publication, Josh Enomoto did not have (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.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.
