Nothing was spared the massive selling we saw over the past week, and the transports were a sector that had already started to come under pressure earlier in the year. The bottom line is fuel costs have plummeted, and that makes margins and earnings that much easier to achieve. Plus, most of the economic data has been positive, and that is directly correlated to the sector.
In a new research note, the UBS analysts liken the pullback this year to the one that happened in 2011 with the sense of multiple macro concerns driving a sharp pullback. The very positive gross domestic product and jobless claims numbers that have come out may help to soothe the concerns. Plus, they point out, especially in the railroad stocks, that they are much cheaper than the S&P industrials.
Here are the three stocks the UBS team is focused on as the best values to buy now.
This top transport company may be eyeing a solid holiday season as falling gas prices boost consumers’ cash. FedEx Corp. (NYSE: FDX) provides transportation, e-commerce and business services in the United States and internationally. The company’s FedEx Express segment provides various shipping services for the delivery of packages and freight. The FedEx Ground segment provides business and residential money-back guaranteed ground package delivery services and consolidates and delivers high volumes of low-weight and less time-sensitive business-to-consumer packages. The FedEx Freight segment offers less-than-truckload freight services, as well as freight-shipping services.
The company is very levered to e-commerce growth, which continues to explode. It also is trading at a huge discount to the firm’s biggest rival, UPS. Analysts are estimating 20% earnings growth, and with a small 12 times earnings multiple, the stock is cheap.
FedEx investors are paid a small 0.7% dividend. The UBS price target for the stock is $195. The Thomson/First Call consensus target is $196.67. The stock closed Thursday at $153.04.