Goldman Sachs Likes UPS & CP

Given the Expectation for a second derivative slowdown in growth, Goldman prefers stocks with favorable supply side dynamics and operational laggards with turnaround potential. Goldman Sachs remains bullish on Air Freight while Neutral on Rail and Truck. Goldman's favorite names are CL-Buy United Parcel Service UPS and Canadian Pacific CP. Goldman expects UPS to benefit from improving pricing in domestic express air freight given a more rational duopoly structure. Also seen is lower capex as UPS exits an investment cycle and a change in structure and compensation practices that puts increasing emphasis on yields and pricing. Within railroads, Canadian Pacific is a best Buy idea given revenue growth tied to attractive bulk commodity export exposure, management additions that present significant margin catch up opportunities, and base pricing improvement as the company laps a regulated grain headwind. UPS closed Wednesday at $67.52 CP closed Wednesday at $61.63