5 Freight-fully Good Stocks - Investment Ideas

The U.S. trade deficit narrowed 14% this week to roughly $43 billion. At first glance I took this like any other piece of economic data and thought what the implications may or may not be. But then I stopped and thought for a minute.

$43 billion is just the difference between imports and exports. For 1 month. That got me thinking just how massive the import/export business actually is. We shipped about $150 billion worth of products in July alone. No doubt about it, moving goods from one place to another is a huge business.

Often Overlooked

Transportation companies may not turn heads like high-flying tech stocks that promise exponential gains, but our global economy necessitates the gigantic, often overlooked, import and export industry.

Yes, it could take a hit if we dip back into a recession, but what wouldn't? And even if the worst does happen, someone will still be shipping goods. After all, unless you grew it yourself, anything you eat, wear or use was on a truck, ship or plane before it got to you.

Assuming we don't see economic contractions, the industry is already red hot and would have no where to go but up. Like just about every industry, the recession forced transportation companies to operate lean and mean, so to speak. Trim the overhead and squeeze every penny you can out of revenue.

So, it doesn't surprise me that just about every stock screen I run, and that’s several per day, turns up at least a few transportation companies.

5 Freight Stocks

Expeditors International of Washington, Inc. (EXPD) is an international logistics company. One great aspect about this company is that they are predominantly services and have little to no hard assets that can sit idle if we do see import/export activity decline.

Additionally, this Zacks #1 Rank (Strong Buy) is coming of a record-setting quarter. Net earnings came in at over $90 million, a 67% year-over-year jump. Net revenues were up 27% to almost $419 million. Total revenue eclipsed $1.5 billion, up from just under $0.9 billion. Earnings per share broke down to 42 cents, beating expectations by 3 cents and up from 25 cents a year ago.

Expeditors has the added benefit of down-to-earth management which makes for some refreshingly honest press releases. One quote I particularly like was "Our philosophy these last several years has been to try to not do anything stupid." The CEO, Mr. Rose, goes on to give more specifics, but it is nice to see management break away from the generic corporate rhetoric and give a very genuine lauding of its employees as well.

UTi Worldwide (UTIW) is an international supply chain services company offering air and ocean freight forwarding, distribution and a variety of related services. Shares carry a Zacks #2 Rank (Buy)

The company is coming off of its Sep 2 quarterly report that showed a 37% increase in revenues which approached $1.2 billion. Net income came in at $18.9 million, which breaks down to an EPS of 19 cents, 3 cents ahead of expectations and 7 cents better than the same period last year.

Comments from the CEO said that UTi's air and ocean freight volumes are rising faster than the market and are already past the 2 year high, which predates the financial crisis.

TAL International Group (TAL) leases intermodal containers, those huge, uniform metal boxes that are stacked onto ships, train cars and big rigs. The company has operations in 37 countries and pays a dividend just over 6%.

Not only is the company a good source of income, but TAL is showing solid growth rates as well. Estimates for 2010 are averaging $1.83, up 12 cents since the late-July earnings surprise.

Forecasts for next year jumped 20 cents to $2.28. These levels are projecting 43% earnings growth this year and another 24% next year. The bullish revisions pushed shares to a Zacks #1 Rank (Strong Buy).

Shares of TAL are also a solid value at 13 times forward estimates and a PEG of 1.0.

CAI International (CAP) manages and leases intermodal freight containers on a global scale.

In early August the company reported net income of $5.7 million, up 73% since the same period last year. Earnings broke down 31 cents per share, beating the Zacks Consensus Estimate by 7 cents. CAI has surprised in 6 of the past 7 quarters.

Estimates jumped on the earnings news and analysts are now expecting growth rates of 53% this year and another 46% in 2011. The Zacks Consensus Estimate for this year rose 17 cents to $1.21. Next year's projections gained 25 cents, to $1.77.

Shares currently have a Zacks #2 Rank (Buy)

Textainer (TGH) is the largest lessor of intermodal containers in the world. They offer dry freight, refrigerated and other specialized containers and are a Zacks #1 Rank (Strong Buy).

Textainer currently is operating at its most efficient level in company history, with a utilization rate nearing 99%. The efficiency led to the company's third consecutive earnings surprise, reporting earnings per share of 59 cents vs. the consensus of 50 cents.

Following that mid-August release, the full-year Zacks Consensus jumped 30 cents, to $2.43. Next year's projections are up 29 cents on average, to $2.71. These levels project annual growth rates of 44% and 12%, respectively.

The valuations are looking good too. The forward P/E is less than 12 times and those growth rates are fairly priced with a PEG of 1.0.

Betting on the Rebound

While double-dip fears still loom for some, this industry will flourish if we can stave off a second recession. Our economy, good or bad, makes these companies a requirement and an irreplaceable one at that. At least until we can start teleporting goods, but I’m not holding my breath on that one.
 
CAI INTL INC (CAP): Free Stock Analysis Report
 
EXPEDITORS INTL (EXPD): Free Stock Analysis Report
 
TAL INTL GRP (TAL): Free Stock Analysis Report
 
TEXTAINER GROUP (TGH): Free Stock Analysis Report
 
UTI WORLDWIDE (UTIW): Free Stock Analysis Report
 
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