Morgan Stanley Adjusts Price Target on Expeditors International of Washington to $86 From $85, Maintains Underweight

CSX Corporation CSX is currently mired in multiple headwinds, which, we believe, have made it an unimpressive investment option.

Let us delve deeper.

Southward Earnings Estimate Revisions of CSX: The Zacks Consensus Estimate for current-year earnings has been revised downward from $1.93 per share to $1.84 in the past 60 days. For the next year, the consensus mark for earnings has moved 4.7% south in the same time frame. The unfavorable estimate revisions indicate brokers’ lack of confidence in the stock.

CSX’s Zacks Rank: CSX currently carries a Zacks Rank #5 (Strong Sell). 

Underperformance of CSX: The CSX stock has gained 2.5% year to date compared with the S&P 500’s 24.7% growth. Moreover, CSX’s current Momentum Style Score of F shows its short-term unattractiveness.

Other Headwinds of CSX: CSX’s prospects have been primarily hurt by the high debt load and soft coal market. The weak coal market has resulted in below-par coal revenues. Coal revenues fell 7% year over year to $553 million in the September-end quarter. Coal volumes decreased 2%. Revenues in the fourth quarter are likely to have been down moderately (approximately by $200 million) due to lower fuel prices and softer coal markets. A weak trucking market is another challenge. Supply-chain disturbances and network-related issues too represent major challenges for CSX. 

Elevated capital expenditures also represent a cause of worry. CSX's management expects 2024 capex to be approximately $2.5 billion, which is higher than 2023 actuals. The company’s shares are more volatile than the market.

Stocks to Consider

Investors interested in the Zacks Transportation sector may consider stocks like Matson MATX and Expeditors International of Washington EXPD.

Matson currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. 

Matson is a Honolulu, HI-based provider of ocean transportation and logistics services. The cost-management actions taken by the company to drive its bottom line are impressive. Efforts to reward its shareholders are commendable as well.

In the past 60 days, the Zacks Consensus Estimate for 2024 earnings has moved 15.5% north. The stock has gained 47.2% year to date.

Expeditors currently carries a Zacks Rank #2 (Buy). This Seattle, WA-based freight forwarder’s efforts to reward its shareholders are commendable. EXPD’s liquidity position is encouraging, too.

EXPD has outshined the Zacks Consensus Estimate in only one of the past four quarters (missing the mark twice and reporting in-line earnings on the other occasion). In the past 60 days, the Zacks Consensus Estimate for 2024 earnings has moved 0.6% north.

Zacks Investment Research

For Immediate Release

Chicago, IL – November 7, 2024 – Today, Zacks Equity Research discusses Expeditors International of Washington EXPD, C.H. Robinson Worldwide CHRW and Matson MATX.

Industry: Transportation

Link: https://www.zacks.com/commentary/2365137/3-transport-service-stocks-to-keep-an-eye-on-despite-industry-hiccups

The Zacks Transportation-Services industry faces headwinds from inflation-induced elevated interest rates, weak freight rates and lingering supply-chain disruptions.

Despite the shortcomings, we believe that stocks like Expeditors International of Washington, C.H. Robinson Worldwide and Matson should be on investors' watchlists.

About the Industry

The companies housed in the Zacks Transportation-Services industry offer transporters logistics, leasing and maintenance services. Some industry players focus on 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.

3 Trends Shaping the Future of the Transportation-Services Industry

Supply-Chain Disruptions & Weak Freight Rates: Although economic activities picked up from the pandemic gloom, lingering supply-chain disruptions continue to dent the industry players. Below-par freight rates are also hurting the industry's prospects. Highlighting the weak freight demand, the Cass Freight Shipment Index declined 5.2% year over year in September. This measure has deteriorated year over year in each of the last nine months, confirming the overall declining trend.

Strong Financial Returns for Shareholders: With economic activities gaining pace from the pandemic lows, more companies are allocating their increasing cash pile through dividends and buybacks to pacify long-suffering shareholders. This underlines their financial strength and confidence in business. Among the Transportation - Services industry players, Expeditors announced a 5.8% increase in the quarterly dividend in May 2024. Matson announced a quarterly dividend increase in June.

Focus on Cost Cuts to Drive Bottom line: Despite cooling inflation, we are by no means out of the woods. The hotter-than-expected inflation reading for September substantiates 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 improving productivity and efficiency to mitigate high expenses and a weaker-than-expected demand scenario.

Zacks Industry Rank Indicates Dull Prospects

The Zacks Transportation - Services industry is a 24-stock group within the broader Zacks Transportation sector. The industry currently carries a Zacks Industry Rank #191, which places it in the bottom 24% of 250 plus 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 2025 earnings estimates have decreased 22.3% from 2024 estimates.

Before we present a few stocks from the industry that you may want to buy, let us take a look at the industry's recent stock market performance and the valuation picture.

Industry Lags Sector & S&P 500

The Zacks Transportation-Services industry has underperformed the Zacks S&P 500 composite and the broader Transportation sector in a year.

The industry has gained 3.4% over this period compared with the S&P 500's appreciation of 31.1% and the broader sector's uptick of 11.3%.

Industry's Current Valuation

Based on the forward 12-month price-to-sales, a commonly used multiple for valuing Transportation-services stocks, the industry is currently trading at 2.18X compared with the S&P 500's 5.04X. The value is, however, higher than the sector's trailing 12-month P/S of 1.82X.

Over the past five years, the industry has traded as high as 2.52X, as low as 1.55X and at the median of 2.02X.

3 Transport Services Stocks to Keep Tab On

Matson: This Honolulu, HI-based provider of ocean transportation and logistics services currently sports a Zacks Rank #1 (Strong Buy). We are impressed by the cost-management actions taken by the company to drive its bottom line. Efforts to reward its shareholders are commendable as well.

Over the past 60 days, the stock has seen the Zacks Consensus Estimate for 2025 earnings move 7.6% north. The stock has gained 74.5% over the past year.

You can see the complete list of today's Zacks #1 Rank stocks here.

Expeditors currently carries a Zacks Rank #2 (Buy). This Seattle, WA-based freight forwarder's efforts to reward its shareholders are commendable. EXPD's liquidity position is encouraging as well.

EXPD has outshined the Zacks Consensus Estimate in two of the past four quarters (missing the mark once and reporting in-line earnings on the other occasion). Over the past 60 days, the stock has seen the Zacks Consensus Estimate for 2024 earnings move 0.6% north.

C.H. Robinson currently carries Zacks Rank #3 (Hold). It operates as an asset-light logistics player. Efforts to control costs bode well for this freight broker. Measures to reward CHRW's shareholders instill further confidence in the stock. CHRW's liquidity position is encouraging as well.

Over the past 60 days, the stock has seen the Zacks Consensus Estimate for 2025 earnings move 2.6% north. The stock has gained 28% in a year.

Why Haven't You Looked at Zacks' Top Stocks?

Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.

Today you can access their live picks without cost or obligation.

See Stocks Free >>

Join us on Facebook: https://www.facebook.com/ZacksInvestmentResearch/

Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.

Media Contact

Zacks Investment Research

800-767-3771 ext. 9339

support@zacks.com

https://www.zacks.com

Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Zacks Investment Research

The Zacks Transportation-Services industry faces headwinds from inflation-induced elevated interest rates, weak freight rates and lingering supply-chain disruptions.

Despite the shortcomings, we believe that stocks like Expeditors International of Washington EXPD, C.H. Robinson Worldwide CHRW and Matson MATX should be on investors’ watchlists.

About the Industry

The companies housed in the Zacks Transportation-Services industry offer transporters logistics, leasing and maintenance services. Some industry players focus on 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.

3 Trends Shaping the Future of the Transportation-Services Industry

Supply-Chain Disruptions & Weak Freight Rates: Although economic activities picked up from the pandemic gloom, lingering supply-chain disruptions continue to dent the industry players. Below-par freight rates are also hurting the industry’s prospects. Highlighting the weak freight demand, the Cass Freight Shipment Index declined 5.2% year over year in September. This measure has deteriorated year over year in each of the last nine months, confirming the overall declining trend.

Strong Financial Returns for Shareholders: With economic activities gaining pace from the pandemic lows, more companies are allocating their increasing cash pile through dividends and buybacks to pacify long-suffering shareholders. This underlines their financial strength and confidence in business. Among the Transportation - Services industry players, Expeditors announced a 5.8% increase in the quarterly dividend in May 2024. Matson announced a quarterly dividend increase in June.

Focus on Cost Cuts to Drive Bottom line: Despite cooling inflation, we are by no means out of the woods. The hotter-than-expected inflation reading for September substantiates 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 improving productivity and efficiency to mitigate high expenses and a weaker-than-expected demand scenario.

Zacks Industry Rank Indicates Dull Prospects

The Zacks Transportation - Services industry is a 24-stock group within the broader Zacks Transportation sector. The industry currently carries a Zacks Industry Rank #191, which places it in the bottom 24% of 250 plus 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 2025 earnings estimates have decreased 22.3% from 2024 estimates.

Before we present a few stocks from the industry that you may want to buy, let us take a look at the industry’s recent stock market performance and the valuation picture.

Industry Lags Sector & S&P 500

The Zacks Transportation-Services industry has underperformed the Zacks S&P 500 composite and the broader Transportation sector in a year.

The industry has gained 3.4% over this period compared with the S&P 500's appreciation of 31.1% and the broader sector’s uptick of 11.3%.

One-Year Price Performance