The global outbreak of COVID-19 lengthened ship delivery times, which resulted in a rise in freight costs. On top of it, the Russia-Ukraine crisis and Shanghai lockdowns have added to supply chain issues. Due to port congestion, experts expect spot freight rates to remain elevated until 2023.
The global freight forwarding market was valued at $186 billion in 2021. Moreover, the market is expected to grow at a CAGR of 3.3% till 2028, driven by growth in international trade volumes.
Hence, we think the freight stocks Hub Group, Inc. (HUBG) and XPO Logistics, Inc. (XPO) might be solid buys now. These stocks are rated Buy in our proprietary POWR Ratings system.
Additionally, these stocks were recommended by Jason Seidl, managing director of Industrials – Airfreight & Surface Transportation at Cowen & Co. (COWN).
Hub Group, Inc. (HUBG)
HUBG provides supply chain solutions in North America. It offers transportation and logistics management services. The company serves several industries, including retail, consumer products, and durable goods.
On June 14, HUBG announced that it had been chosen as the Intermodal Carrier of the Year by its long-time customer, Church & Dwight Co., Inc. (CHD), based on its services. About this, Phillip D. Yeager, President and COO of HUBG, said, “This recognition underscores our team’s commitment to our values of service, integrity and innovation every day.”
For the fiscal first quarter ended March 31, HUBG’s revenue increased 41.2% year-over-year to $1.30 billion. Net income and EPS rose 407.9% and 405.9% from the prior-year quarter to $87.50 million and $2.58. EBITDA improved 168.2% from the same period the prior year to $150.38 million.
The consensus EPS estimate of $2.53 for the quarter ending June 2022 indicates a 224.4% year-over-year increase. Likewise, the consensus revenue estimate for the same quarter of $1.34 billion reflects an improvement of 37.2% from the prior-year period. Moreover, HUBG has an impressive surprise earnings history, as it has topped consensus EPS estimates in each of the trailing four quarters.
The stock has gained 6% over the past year and 3.1% over the past five days to close its last trading session at $70.32.
HUBG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
HUBG has a Growth grade of A and a Momentum grade of B. In the 17-stock Air Freight & Shipping Services industry, it is ranked #7. The industry is rated A. Click here to see the additional POWR Ratings for HUBG (Value, Stability, Sentiment, and Quality).
XPO Logistics, Inc. (XPO)
XPO operates as a global freight transportation services provider. The company operates through two segments North American LTL and Brokerage and Other Services. It serves industrial and manufacturing, retail and e-commerce, food and beverage, and consumer goods industries.
On June 6, XPO and Google Cloud announced a multi-year collaboration for innovating how goods move through supply chains. The collaboration leveraging Google Cloud’s AI, ML, and data analytics capabilities, is expected to make the company’s operations more efficient.
On April 18, XPO announced the expansion of its North American LTL network with the expected openings of its two less-than-truckload (LTL) terminals. This should bolster the company’s operative capacity.
XPO’s revenue increased 16.2% year-over-year to $3.47 billion in the fiscal first quarter ended March 31. Adjusted net income from continuing operations attributable to common shareholders improved 62.9% from the prior-year period to $145 million. Adjusted EPS from continuing operations came in at $1.25, up 58.2% from the same period the prior year.
Street EPS estimate for the fiscal year 2022 of $5.51 reflects a rise of 28.1% from the prior year. Likewise, Street revenue estimate for the same year of $13.19 billion indicates an increase of 3% year-over-year. In addition, XPO has topped consensus EPS estimates in three out of the trailing four quarters, which is impressive.
The stock has gained 6% over the past five days to close its last trading session at $48.43.
It’s no surprise that XPO has an overall B rating, which translates to Buy in our POWR Ratings system. The stock has a B grade for Value and Quality. It is ranked #10 out of the 22 stocks in the Trucking Freight industry. The industry is rated A.
In addition to the POWR Rating grades we’ve stated above, one can see XPO ratings for Growth, Momentum, Stability, and Sentiment here.
HUBG shares were trading at $69.01 per share on Wednesday morning, down $1.31 (-1.86%). Year-to-date, HUBG has declined -18.08%, versus a -19.22% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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