The Commerce Department has recently suggested that the economy could get a boost from significant gains in wholesale and retail inventories last month, and trade would once again contribute to gross domestic product in the third quarter. This led economists to upgrade their GDP growth estimates.
Amid this, continued technological advancements and a surge in e-commerce activities should drive the shipping industry’s growth. The global logistics market reached a value of $4.92 trillion in 2021. The IMARC Group has projected the market to reach $6.55 trillion by 2027, growing at a CAGR of 4.7% during 2022-2027.
However, industry giant FedEx Corporation’s (FDX) first-quarter earnings report showed a 20% year-over-year decline in profit. Moreover, the company expects business conditions to weaken further in the current quarter amid weaker global volume.
The stock has slumped 31.3% over the past month and 42% year-to-date to close its last trading session at $149.99, lower than its 50-day and 200-day moving averages of $210.50 and $222.53, respectively. Moreover, the company plans to raise shipping rates by an average of 6.9% across major services from January, which could lead to a decline in volume.
However, United Parcel Service, Inc. (UPS), Universal Logistics Holdings, Inc. (ULH), and Bristow Group Inc. (VTOL) look better positioned to capitalize on the industry’s long-term growth prospects. So, it could be wise to invest in these stocks instead.
United Parcel Service, Inc. (UPS)
UPS provides package delivery services and supply chain management solutions globally. The company operates through two broad segments, U.S. Domestic Package and International Package.
On August 8, 2022, UPS announced its plans to acquire Bomi Group, an industry-leading multinational healthcare logistics provider. The transaction is expected to enhance the company’s end-to-end global healthcare logistic capabilities by adding temperature-controlled facilities in 14 countries and nearly 3,000 highly-skilled team members to the UPS Healthcare network in Europe and Latin America.
On August 3, UPS announced its regular quarterly dividend of $1.52 on all outstanding Class A and B shares, which was payable to shareholders on September 1. This reflects the cash generation ability of the company.
During the second fiscal quarter that ended June 30, 2022, UPS’ consolidated revenues increased 5.7% from the year-ago value to $24.80 billion. The company’s adjusted consolidated operating profit increased 9.3% year-over-year to $3.58 billion. Adjusted EPS for the quarter increased 7.5% year-over-year to $3.29.
For the fiscal third quarter ending September, analysts expect UPS’s revenue and EPS to increase 5.2% and 6.1% year-over-year to $24.39 billion and $2.88, respectively. The company has an impressive earnings surprise history, as it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 1.4% intraday to close the last trading session at $167.12.
UPS’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Quality and a B for Stability. UPS is ranked #6 among 17 stocks in the A-rated Air Freight & Shipping Services industry. Click here to access additional ratings for UPS for Growth, Value, Momentum, and Sentiment.
Universal Logistics Holdings, Inc. (ULH)
ULH provides transportation and logistics solutions in the United States, Mexico, Canada, and Colombia. The company provides truckload services, domestic and international freight forwarding, customs brokerage services, and final mile and ground expedite services.
On July 28, ULH declared a dividend of $0.105 per share of common stock, payable to shareholders on October 3. This reflects upon the company’s ability to pay back its shareholders.
ULH’s total operating revenues came in at $527.18 million for the second quarter that ended July 2, representing a 24.7% year-over-year growth. Its income from operations grew 106.5% from the prior-year quarter to $64.65 million, while its non-GAAP EBITDA rose 69.2% from the same period last year to $90.89 million. EPS increased 77.9% from the prior-year period to $1.69.
Analysts expect ULH’s revenue for the third quarter ending September 2022 to be $494.30 million, indicating a 10.9% year-over-year growth. The company’s EPS for the same quarter is expected to increase 81.6% from the prior-year quarter to $1.35. Additionally, ULH has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.
ULH has gained 73.4% year-to-date and 56% over the past six months to close its last trading session at $32.71. The stock has gained 66.6% over the past year.
It is no surprise that ULH has an overall A rating, which translates to Strong Buy in our POWR Ratings system. ULH has an A grade for Growth and Sentiment and a B for Value, Momentum, and Stability. It is ranked #2 in the same industry.
Beyond what we’ve stated above, we have also given ULH a grade for Quality. Get all ULH ratings here.
Bristow Group Inc. (VTOL)
VTOL provides aviation services to integrated, national, and independent offshore energy companies. It also offers commercial search and rescue services and helicopter and fixed-wing transportation services.
On September 7, VTOL announced an award of a search and rescue contract from Equinor ASA (EQNR) to provide services at the Johan Sverdrup and Statfjord B platforms, located off the west coast of Norway. This might benefit the company.
On August 3, VTOL announced that it had completed its acquisition of British International Helicopter Services Limited. With this acquisition, the company is expected to expand its services further throughout the United Kingdom and beyond.
For the first quarter of fiscal 2023 that ended June 30, VTOL’s total revenues increased 5% sequentially to $301.74 million. Its adjusted EBITDA rose 36.6% from the prior quarter to $49.01 million. The company’s net income and net income per share came in at $4.02 million and $0.14, up 191.8% and 193.3% from the previous quarter.
The company’s EPS is expected to grow 526.9% year-over-year for the second quarter ending September to $0.45. Street expects VTOL’s revenue to come in at $307.45 million, indicating a 2% increase from the prior-year period.
The stock has gained 4.3% intraday to close its last trading session at $24.26.
This promising prospect is reflected in VTOL’s POWR Ratings. The stock has an overall A rating, equating to a Strong Buy in our proprietary rating system.
VTOL has an A grade for Momentum and a B for Growth, Value, and Sentiment. It is ranked #1 in the same industry. Click here to see the additional POWR Ratings for Stability and Quality for VTOL.
UPS shares were trading at $165.32 per share on Thursday afternoon, down $1.80 (-1.08%). Year-to-date, UPS has declined -21.06%, versus a -22.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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