While it’s not the most encouraging topic, should a severe market correction occur, forward-thinking contrarians may want to consider transportation stocks to buy. Yes, it’s a boring sector but there’s a method to the madness.
First, the sector represents the real economy; that is, it’s where the rubber meets the road, literally and figuratively. Sure, the initial crash is painful for this and other industries. However, once the economy – because it always does – the transportation sector may be one of the first to experience gains.
Second and on a related note, the ecosystem enjoys permanent relevance. Modern societies are built on kinesis, not stasis. So, as long as any commercial activity exists, there will be a need for the movement of goods. On that note, below are transportation stocks to buy.
CSX (CSX)
One of the top transportation stocks to buy, CSX (NASDAQ:CSX) provides rail-based freight transportation services. Per its public profile, CSX specializes in the transporting of intermodal containers and trailers along with other sector-related services. These include rail-to-truck transfers and bulk commodity operations. While shares got off to a solid start earlier this year, in the past month, CSX stock slipped almost 8%.
Financially, the company isn’t setting new performance benchmarks. However, it is a consistent player, doing what it needs to. In the past four quarters, CSX’s average positive earnings surprise comes out to 1.13%. Profitability is one of the core strengths, with the company delivering a net margin of 24.75%. That’s above 88.79% of the competition.
Still, in fairness, investors are paying for the consistency, with a forward earnings multiple of 17.42X. That’s above the sector median 12.82X. Nevertheless, analysts anticipate a high-side earnings per share of $2.02. That’s a decent lift from last year’s result of $1.85. As a result, CSX could be a solid candidate for transportation stocks to buy.
Knight-Swift Transportation (KNX)
A well-recognized name in the freight transportation service industry, Knight-Swift Transportation (NYSE:KNX) operates through four segments: Truckload, Less-than-truckload (LTL), Logistics and Intermodal. While KNX stock is a relevant idea, it’s also risky. Since the start of the year, shares stumbled more than 18%. Nevertheless, for speculators targeting a big discount, KNX could soon be intriguing.
To be fair, the company has been all over the map in terms of its financial performance. For example, in the first quarter of this year, Knight-Swift posted EPS of 12 cents. That was well off the expected print of 20 cents. So, the red ink is justified. Still, with shares getting a beating, KNX is now trading at 1.07X book value. That seems a little light.
True, the expected EPS for fiscal 2024 only comes out to $1.45. That’s a far cry from the anticipated $1.72. Still, the most optimistic analyst believes EPS of $2.53 is possible. For fiscal 2025, this bottom-line metric could rise to $3.99. Also, 2025 sales could reach $9.11 billion. It’s a long shot but worth keeping on the radar.
FedEx (FDX)
While one of the most recognizable transportation stocks to buy, FedEx (NYSE:FDX) also faces competitive concerns. As well, the company – like the other transportation players – depends heavily on consumer sentiment. That said, businesses evolve, FedEx courier services – such as its overnight deliveries – could witness demand expansion.
Of course, with Amazon (NASDAQ:AMZN) investing in its own delivery service, the matter has clouded FedEx and its rivals. Still, it’s also possible that the burgeoning gig economy could boost sales for FedEx. The company’s performance over the past four quarters reflects that FDX isn’t entirely a lost cause. Even with an earnings miss in the quarter ended Nov. 30, the average quarterly surprise came out to 7.6%.
Currently, FDX trades at 12.24X forward earnings, which is decent. That’s with an expected EPS target of $17.80 by the end of fiscal 2024. It’s also possible that on the high end, EPS could land at $18.10 and $23.30 in fiscal 2025. If you want to gamble, FDX could be an interesting idea for transportation stocks to buy.
On the date of publication, Josh Enomoto 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.