Generally during any secular bull market, the industrial stocks that are classified as transports are a leading indicator and usually a leading sector. Transports often give market strategists a glimpse of the overall health of the economy. This year was no exception, as the transport stocks had a tremendous year.
In a new research report, the Airfreight and Surface Transportation analysts at Deutsche Bank point out that their transport coverage universe was up 48% versus the S&P 500 25%. Despite this strong outperformance they are very positive on 2014 and are looking for a blended return of 17%. While valuations are fair and in line with historical numbers, they are expecting some multiple expansion on rising earnings. In their top stocks to buy for 2014, they focus on stocks with solid and unique secular growth opportunities.
Here are the top Deutsche Bank transport stocks to buy for 2014.
FedEx Corp. (NYSE: FDX) is a top name to buy and is experiencing one of the most difficult holiday seasons in some time due to extreme weather across the country. The International Air Transport Association recently raised its outlook for 2014. In 2014, the industry will have seen increases of 64% in passenger loads and 37% in cargo volumes over a 10-year period, but fuel usage will have risen by just 17%. It is a very solid backdrop for continued success. Investors are paid a small 0.4% dividend. The Deutsche Bank price target for the stock is raised from $135 to $183. The Thomson/First Call estimate is at $140. FedEx closed Wednesday at $139.72.
United Parcel Services Inc. (NYSE: UPS) is expected to have the same tailwind that will benefit rival FedEx. The company is a global leader in logistics, offering a broad range of solutions, including the transportation of packages and freight, the facilitation of international trade and the deployment of advanced technology to more efficiently manage the world of business. Investors are paid a solid 2.4% dividend. Deutsche Bank raises its price target from $100 to $123. The consensus price target is posted at $105. UPS closed Wednesday at $102.98.
Union Pacific Corp. (NYSE: UNP) is one of the top railroad stocks to own for 2014. Union Pacific is riding a crude oil-by-rail bonanza. Its rail service area runs through the midcontinent region: the heart of the energy boom. However, the oil, gas and shale explosion is not limited to moving hydrocarbons from wellhead to market. Investors receive a 1.9% dividend. Deutsche Bank raises its price target from $175 to $198. The consensus target is set at $175. Union Pacific closed Wednesday at $163.56.
Genesee & Wyoming Inc. (NYSE: GWR) is a lesser known shortline and regional railroad that may have big gains for investors in 2014. The company’s traffic in November 2013 was 152,308 carloads, an increase of 77,260 carloads, or 102.9%, compared to traffic in November 2012, and an increase of 7,826 carloads, or 5.4%, compared to total November 2012 carloads pro forma for the RailAmerica acquisition. This kind of solid growth in traffic bodes well for 2014. Deutsche Bank raises its target price from $104 to $116. The consensus price target is $110. G&W closed Wednesday at $94.74.
Roadrunner Transportation Systems Inc. (NYSE: RRTS) provides asset-light transportation and logistics services. The company operates in three segments: Less-Than-Truckload, Truckload and Logistics, and Transportation Management Solutions. Deutsche Bank raises its price target on this well-run logistics company from $32 to $35. The consensus target for the stock is $34. Roadrunner closed Wednesday at $25.19.
J.B. Hunt Transport Services Inc. (NASDAQ: JBHT) is a leading trucking company that focuses on providing safe and reliable transportation services to a diverse group of customers throughout the continental United States, Canada and Mexico. Utilizing an integrated, multimodal approach, the company provides capacity-oriented solutions centered on delivering customer value and industry-leading service. Investors receive a small 0.80% dividend. Deutsche Bank raises the price objective from $83 to $89. The consensus target is $81. J.B. Hunt closed Wednesday at $76.71.
Swift Transportation Co. (NYSE: SWFT) rounds out the list of top transports to buy for 2014 at Deutsche Bank. Swift is a stock that may have huge upside if the shorts who are currently circling the stock are wrong. A staggering 43.2% of the shares have been sold short, despite the fact that earnings estimates have been raised. Deutsche Bank raises its price target on the Buy-rated stock to $29 from $22. The consensus is at $25. Swift closed Wednesday at $23.24.
While the stocks that are the top transports may lack the sizzle of a sexier tech or momentum stocks, they are a leading edge of any move higher in the market. The outperformance of transport to the overall market in 2013 was significant. Even if 2014 is not the blockbuster year 2013 was, any move higher may be foreshadowed by these top names to buy.