|
MILWAUKEE
— When transportation analyst
Jon A. Langenfeld
looks at freight trends, he sees the foundations of an
economic recovery.
The
amount of goods being shipped has been relatively
consistent during the last six months, said Langenfeld,
a director and senior research analyst at
Robert W. Baird & Co.
in
Milwaukee
.
"The
longer we can be stable, the healthier this recovery
will be when it gets here," he said.
Langenfeld
isn't in the business of predicting when a full-blown
recovery might arrive. But he says the railroad,
trucking, air freight and other transportation companies
he covers tend to be among the first to show strong
results in economic recoveries.
"Once
confidence starts to improve and inventory gets built,
capacity will tighten rather quickly, which will lead to
pricing growth, which will lead to better earnings
growth," Langenfeld said.
He
expects to see signs of improvement in the
transportation sector by the second half of 2010. So now
may be the time to start looking at these stocks, whose
prices tend to start rising six to eight months before
financial results strengthen, Langenfeld said.
"You
try to find good companies with defendable business
models that have the ability to achieve earnings at a
much higher clip than they did in the previous
cycle," he said.
Here are
three that Langenfeld said fit that bill:
—
Knight Transportation Inc.
, of
Phoenix
, transports consumer goods and other commodities in
short to medium hauls throughout the U.S. Over the past
year, its shares have traded in a range of
$12.17 to $18.95
.
This
small-cap company is a best-in-class truckload carrier
that's done a great job diversifying its business and
protecting its base, with volumes off just 5 percent
from their peak, Langenfeld said.
—
J.B. Hunt Transport Services Inc.
, of
Lowell, Ark.
, provides transportation and logistics services in the
U.S.,
Canada
and
Mexico
. Its shares have traded in a 52-week range of
$18.14 to $34.78
.
This
mid-cap company has an unmatched intermodal rail segment
that allows customers to ship goods in containers that
can be hitched to truck cabs or put on railroad
flatcars, Langenfeld said. Intermodal should grow as
rapidly during this cycle as it did during the last one,
he said.
—
CSX Corp.
, of
Jacksonville, Fla.
, is an international freight transportation company
that provides rail, intermodal, domestic container
shipping, and contract logistics services. Its shares
have traded as high as
$50.17
and as low as
$20.70
in the last 52 weeks.
This
large-cap company didn't fully realize its earnings
potential from 2006 through 2008 because its turnaround
was cut short by the recession, Langenfeld said.
Its stock
price has been rising, but CSX is expected to continue
to deliver because of its attractive valuation,
potential for profit margin improvement, and continued
pricing growth, Langenfeld said.
The
biggest risk Langenfeld associates with all of these
economically-sensitive stocks is the possibility the
economy won't improve, demand will continue to languish,
and pricing pressure will increase.
CSX
shares could go as high as
$59
in the next 12 months, Langenfeld said.
|
