In August 2023, there was ~28.4% growth in total traffic, as exhibited by revenue passenger kilometers (RPKs), in comparison to August 2022. This was as per the report by International Air Transport Association (IATA). On the global basis, traffic has touched ~95.7% of those levels which were seen before COVID-19. International traffic saw ~30.4% rise against August last year, as all the markets saw double-digit percentage growth year-over-year. Demand for air travel was healthy in August, and ticket sales data exhibits that international bookings continue to strengthen for air travel in 2H of the year. With promising outlook for air travel, experts believe that investors should invest in best transportation stocks in the current economic environment.
Now that we have discussed air travel, let us now check what’s going on in shipping industry. Shipping has been categorised as a critical segment of overall transportation sector and this segment continues to face significant challenges. Maersk, which is a largest player in the global shipping, announced that it plans to cut its workforce by over ~10,000 employees. The company also projects lower profits as a result of overcapacity leading to price declines. Despite all these factors, it maintained full-year EBITDA guidance of between $9.5 billion – $11 billion. However, the company expects to report EBITDA at the lower end of this range. Therefore, while transportation sector seems promising, it is of utmost importance to select the best transportation stocks using different screening criteria.
On a positive note, electrification of public transport is expected to make overall sector greener. For example, India made an announcement about the ~$7 billion investment which will be focused on environmentally-friendly public transportation. The goal of this huge package is to reduce vehicle emissions and address the transportation needs in the country’s urban areas.
With this in mind, we will now have a look at best transportation stocks for investors to consider before 2023 ends.
1. Southwest Airlines Co.
The company has been categorised as largest domestic carrier in the US, as measured by number of originating passengers boarded.
In 3Q23, it saw net income of $193 million, or $0.31 per diluted share and net income, excluding special items, came in at $240 million, or $0.38 per diluted share. It saw record third quarter operating revenues of $6.5 billion. Revenue strength stemmed from strong leisure demand across the quarter and as managed business performed as expected. The company continues to gain initiative-driven market share in corporate travel space.
It has maintained an industry-leading fortress balance sheet in most challenging period in the entire aviation history.
Entering into 4Q23, the company has seen overall demand for travel remaining stable, which includes healthy bookings to-date for holiday travel periods. With leisure demand remaining healthy, the company believes that leisure trends continue to return to historically seasonal norms, and business trends are still stable. Based on current trends, the company expects strong 4Q operating revenue as a result of record 4Q passengers. It expects 4Q23 RASM to decline between 9% – 11% year-over-year.
2. Knight-Swift Transportation Holdings Inc.
The company is by far the largest asset-based full-truckload carrier in the US.
Net income attributable to the company came in at $60.2 million and adjusted net income attributable to was $67.2 million. During 3Q23, the company saw consolidated total revenue was $2.0 billion, exhibiting a rise of 6.5% from 3Q22. Consolidated operating income came in at $81.1 million, a fall of 69.5%, in comparison to same quarter of the last year.
Freight demand was stable at lower levels in truckload market and relatively healthy in the less-than-truckload market (LTL).
As of September 30, 2023, the company had a balance of $1.0 billion of unrestricted cash and available liquidity and $7.1 billion of stockholders’ equity. FCF for the YTD period ended September 30, 2023 came at $235.1 million. During YTD period ending September 30, 2023, the company generated $873.5 million in operating cash flows, and it paid down $44.4 million in finance lease liabilities.
The company expects that adjusted EPS for FY23 will be between $2.10 – 2.20, which is an update from previously disclosed range of $2.10 – $2.30. It anticipates net cash capital expenditures for FY23 of $700 million – $750 million.
3. American Airlines Group Inc.
The company is the world’s largest airline by scheduled revenue passenger miles.
It saw record 3Q revenue of ~$13.5 billion and its GAAP third-quarter net loss was $545 million or ($0.83) per diluted share. Excluding net special items, its 3Q net income came at $263 million, or $0.38 per diluted share. The company ended the third quarter with ~$13.5 billion of total available liquidity.
In 3Q, the company saw reduction in total debt of $1.4 billion in the third quarter.
The company continues to deliver record-setting reliability and operational performance. It continues to execute on its plans and is well-positioned for the future. This should be supported by the strength of its network, and its outstanding team.
It saw record 3Q revenues of ~$13.5 billion as a result of strong demand environment and record-setting co-brand credit card and travel rewards program revenue. As of 30th September 2023, the company reduced its total debt by ~$10.9 billion from peak levels which were seen in mid-2021.
The company anticipates 4Q23 adjusted operating margin of between 2% – 4%. It expects FY23 adjusted operating margin of ~7%.
While above are some of the best transportation stocks for investors to consider before 2023 ends, there are several other companies which are expected to perform well in the current economic environment.
As per India Brand Equity Foundation, Indian e-commerce sector should be worth US$350 billion by 2030. Best transportation stocks are expected to be supported by digital literacy which has resulted in an increase in investment in e-commerce businesses. For example, automation technologies, including robotics and artificial intelligence, saw significant improvement in efficiency in various aspects of transportation. Automated systems related to cargo handling, inventory management, and maintenance processes have supported in streamlining operations and increased productivity.