Chicago, IL – May 6, 2025 – Today, Zacks Equity Research discusses Expeditors International of Washington EXPD, C.H. Robinson Worldwide CHRW and Matson MATX.
Link: https://www.zacks.com/commentary/2461743/3-transport-service-stocks-to-keep-an-eye-on-amid-industry-headwinds
The Zacks Transportation-Services industry faces challenges, ranging from weak freight rates, high inflation and lingering supply-chain disruptions. Tariff-related uncertainty represents another challenge for this key industry.
Despite these challenges, companies like Expeditors International of Washington, C.H. Robinson Worldwide and Matson stand out for their ability to navigate these dynamics.
The companies belonging to the Zacks Transportation-Services industry offer transporters logistics, leasing and maintenance services. Some industry players focus on the business of global logistics management, including international freight forwarding. Third-party logistics entities provide innovative supply-chain solutions. They also focus on services like product sourcing, warehousing and freight shipping.
These companies have expertise in trucking, air and ocean transportation. Some players in this industry deliver domestic and international express delivery services. The well-being of the companies in this industrial cohort is directly proportional to the health of the economy. An uptick in manufactured and retail goods, favorable pricing and improvement in global economic conditions bode well for industry participants.
Supply-Chain Disruptions & Weak Freight Rates: Although economic activities picked up from the pandemic gloom, lingering supply-chain disruptions continue to dent stocks in the industry. Below-par freight rates are also hurting the industry's prospects. Highlighting the weak freight demand, the Cass Freight Shipments Index declined 5.3% year over year in March. This measure has deteriorated year over year in each of the past eight months, which confirms the overall declining trend.
Focus on Cost Cuts to Drive the Bottom Line: Despite signs of cooling inflation, we are by no means out of the woods. The hotter-than-expected inflation readings in the past few months substantiate our view. We note that the industry has been experiencing significant levels of inflation, including higher prices for labor, freight and fuel. The industry players are focusing on cost-cutting measures and making efforts to improve productivity and efficiency to mitigate high expenses and a weaker-than-expected demand scenario.
Tariff Turmoil: The current administration is focused on protectionism that restricts international trade to help domestic industries. Tariff tensions are heating up, with new tariffs levied by the U.S. federal government. The tariffs have impacted the United States' biggest trading partners — Canada, Mexico, and China. With retaliatory tariffs against the United States, trade tensions are escalating. This trade war is expected to result in increased volatility and uncertainty going forward. The tariff turmoil is resulting in a slowdown in global trade, which is likely to hurt industry players.
The Zacks Transportation - Services industry is a 23-stock group within the broader Zacks Transportation sector. The industry currently carries a Zacks Industry Rank #195, which places it in the bottom 21% of 250 Zacks industries.
The group's Zacks Industry Rank, the average of the Zacks Rank of all member stocks, indicates dismal near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
The industry's position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group's earnings growth potential. The industry's earnings estimate for 2025 has decreased by 21.6% since August 2024.
Before we present a few stocks from the industry that you may want to buy, let's take a look at the industry's recent stock market performance and the valuation picture.
The Zacks Transportation-Services industry has underperformed the Zacks S&P 500 composite while surpassing the broader Transportation sector in a year's time.
The industry has declined 14.5% over this period compared with the S&P 500's appreciation of 9.9% and the broader sector's slide of 16.3%.
Based on the forward 12-month price-to-sales, a commonly used multiple for valuing Transportation-services stocks, the industry is currently trading at 1.46X compared with the S&P 500's 4.92X. The value is a tad higher than the sector's trailing 12-month P/S of 1.45X.
Over the past five years, the industry has traded as high as 2.89X, as low as 1.46X and at the median of 1.82X.
Expeditors, a leading third-party logistics provider, is based in Seattle, WA. EXPD currently has a Zacks Rank #3 (Hold). EXPD beat the Zacks Consensus Estimate in three of the last four quarters and matched estimates once, the average beat being 11.6%
While weak volumes (with respect to air-freight tonnage and ocean containers) stemming from soft demand and declining rates are hurting EXPD's performance, efforts to cut costs in the face of demand weakness are driving the bottom line.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
C.H. Robinson, currently carrying a Zacks Rank #3, operates as an asset-light logistics player. Efforts to control costs bode well for this freight broker. Measures to reward CHRW's shareholders bode well. CHRW's liquidity position is encouraging too.
CHRW surpassed the Zacks Consensus Estimate for earnings in each of the past four quarters. The average beat is 14.5%.
Matson: Headquartered in Honolulu, HI, Matson provides ocean transportation and logistics services. We are impressed by the cost-management actions taken by the company to drive its bottom line. Its efforts to reward its shareholders are also commendable.
MATX carries a Zacks Rank #3 currently. MATX has a trailing four-quarter earnings surprise of 12.7%, on average.
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C.H. Robinson Worldwide, Inc. (CHRW) : Free Stock Analysis Report
Expeditors International of Washington, Inc. (EXPD) : Free Stock Analysis Report
Matson, Inc. (MATX) : Free Stock Analysis Report
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