Expected Price Gains in Transportation Stocks (CSX, NSC, UNP, CP, DSX, DRYS, EXM, FRO, JBHT, LSTR)
Transportation stocks get a lot more attention as economic bellwethers than they do as market participants. Railroads, ships, and trucks are not particularly glamorous, and the industries are so entrenched that they most resemble utility stocks.
The companies included in today’s overview are CSX Corp. (NYSE: CSX), Norfolk Southern Corp. (NYSE: NSC), Union Pacific Corp. (NYSE: UNP), Canadian Pacific Railway Ltd. (NYSE: CP), Diana Shipping Inc. (NYSE: DSX), DryShips, Inc. (NASDAQ: DRYS), Excel Maritime Carriers Ltd. (NYSE: EXM), Frontline Ltd. (NYSE: FRO), JB Hunt Transport Services Inc. (NASDAQ: JBHT), and LandStar System Inc. (NASDAQ: LSTR).
Of the ten stocks we’re looking at today, only one trades more than 10 million shares a day and most of the others trade less than 3 million. On the surface, it would seem that all these stocks would more or less trade in parallel. In practice, though, railroads and trucking companies are faring far better than sea-borne shippers. Railroads are hauling more coal, and trucking companies are having trouble meeting demand for their services. Shippers overbuilt their fleets, and the resulting collapse in day rates has been punishing for their top and bottom lines.
Cargo traffic is closely watched at this time of year as a predictor of holiday retail sales. Typically, ocean container shipping headed to the US tips the coming strength of retail sales. This year, container shipments have been somewhat lower, and this month’s totals will really tell the tale. Rail and truck traffic has been strong though, although the shortage of available trucks is diverting more container (intermodal) traffic to the railroads.
All data from Yahoo! Finance, and share prices were collected shortly before noon today.
CSX Corp. (NYSE: CSX) has a median target price of $27.00 from 24 brokers. Shares are trading today at $22.66, for an implied gain of $4.34, or 19%. CSX’s forward P/E is 11.73 and the company pays a dividend yield of 2.3%. The stock’s 52-week trading range is $17.69-$27.06, and at today’s price that’s about 28% above its 52-week low, posted earlier this morning, and 16% below the 52-week high. CSX met analysts’ expectations when it reported third quarter earnings about 10 days ago. The company noted a 15% jump in intermodal freight revenue, although volume was essentially unchanged from the same period a year ago. CSX said at the time that it does not expect significant growth in the US, but neither does it predict a double-dip recession.
Norfolk Southern Corp. (NYSE: NSC) has a median target price of $82.00 from 23 brokers. Shares are trading today at $74.74, for an implied gain of $7.26, or 10%. Norfolk Southern’s forward P/E is 12.91 and the company pays a dividend yield of 2.5%. The stock’s 52-week trading range is $57.57-$78.40, and at today’s price that’s about 30% above its 52-week low, posted earlier this morning, and 5% below the 52-week high. Norfolk Southern hauled 23% more coal in the third quarter than it did a year ago, and its intermodal traffic volume increased by 13%. Like CSX, the company expects modest economic growth in the US going forward. The company’s implied stock price gain is about half that of CSX, but with both coal and intermodal traffic up and growing, Norfolk Southern is more likely to bust through its current target price than the other railroads we’ve looked at today.
Union Pacific Corp. (NYSE: UNP) has a median target price of $110.00 from 25 brokers. Shares are trading today at $102.35, for an implied gain of $7.65, or 7.5%. Union Pacific’s forward P/E is 13.15 and the company pays a dividend yield of 2%. The stock’s 52-week trading range is $77.73-$107.89, and at today’s price that’s about 32% above its 52-week low, posted earlier this morning, and 5% below the 52-week high. Union Pacific posted third quarter earnings a week ago, and its international intermodal shipments were down -12% year-over-year. That implies that retailers are buying less in anticipation of a slower holiday shopping season.