Full Speed Ahead: 3 Transportation Stocks Picks Delivering Stellar Returns

Larry Ramer

Sun, Apr 21, 2024, 4:47 AM 3 min read

Given the current, strong state of the macro economy, many transportation stocks have performed very well in recent months. And that trend is likely to continue for the foreseeable future. On the consumer side, the strong labor market has resulted in continued, powerful travel trends. Plus, with Washington spending a great deal of money on infrastructure, a high number of truck makers and railroad firms have done very well. Automakers are also doing relatively well because of consumer strength, and the fact that most of the names in the sector were priced for a recession that never arrived. Moreover, given the U.S. Federal Reserve’s clear desire to still cut interest rates later this year, lower rates should boost the auto sector at some point. Lets take a look at three transportation stocks that are likely to boost your portfolio.

Greenbrier (GBX)

The Greenbrier Companies (GBX)logo on the website homepage

Source: Casimiro PT / Shutterstock.com

I’ve long been bullish on train equipment company Greenbrier (NYSE:GBX). Mainly due to the firm’s leverage to the factory building trend in the U.S., and Washington’s high infrastructure spending.

Of course, a great deal of material is needed to build factories, and freight trains are used to haul many of these commodities. Moreover, the bipartisan infrastructure law includes a huge $66 billion for the railroad sector. GBX is getting a lift from those expenditures.

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In light of these points, I’m not surprised that GBX has jumped 17% in the last three months and 74% in the last 12 months.

The company reported much better-than-expected fiscal second-quarter results on April 5 as its EPS came in at $1.03, versus analysts’ average estimate of 90 cents. Meanwhile, it generated revenue of $863 million, compared with $842 million.

American Airlines (AAL)

American Airlines plane on ramp in Chicago Airport. American Airlines is amongst the airlines cancelling flights

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American Airlines (NYSE:AAL) reported strong first-quarter results on April 18, which showed that it’s benefiting tremendously from the travel boom. Specifically, its operating revenue climbed 10% versus the same period a year earlier to $12.5 billion. And its free cash flow advanced to $1.48 billion from $1.3 billion in Q1 of 2022.

Also impressive is that its total revenue per available seat mile increased 0.6% year-over-year while its cost per available seat mile dropped 0.6% YOY. The data suggests that the firm’s profitability is indeed headed higher.

While higher oil prices could threaten the latter dynamic, oil prices have trended downward in recent days as the chances of a direct Iran-Israel war fade. Further, I believe that oil prices’ fundamentals are poor due to the electrification of transportation.

General Motors (GM)

Cadillac car and SUV dealership. Cadillac offers a full line of gas and electric EV vehicles. GM stock

Source: Jonathan Weiss / Shutterstock.com

General Motors (NYSE:GM) stock advanced 20% over the three months that ended on April 18. Among the positive catalysts for GM stock were the company’s decision in November to institute a record $10 billion buyback. Another was the increase of its dividend by 33% to 12 cents per share. Additionally, the automaker pleased the Street by cutting its annual costs by $2 billion.

Wall Street analysts have generally been upbeat on GM stock recently. For example, Deutsche Bank predicted that the firm “could report a particularly solid beat” when it delivers its Q1 results.

Also bullish on GM was UBS which identified GM as one of its favorite names transportation stocks. Finally, Morgan Stanley in has also made GM one of its top picks. In March, it upgraded the Auto sector to “attractive” from “in-line.” The bank expects automakers to benefit from its reduced spending this year.

On the date of publication, Larry Ramer 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

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.