JB Hunt (NASDAQ:JBHT). Analysts expect JBHT, which reports after the market closes today, to post earnings per share of 67 cents. The company’s competitive edge is in its powerhouse “intermodal” operations — handling cargo in containers that can travel by ocean, road or rail. JB Hunt is betting big on intermodal: It accounts for nearly 70% of revenue and is offsetting some sluggish growth in its truckload and dedicated contract businesses.
JB Hunt has one of the largest market caps in the trucking industry at about $6.4 billion. Trading around $54.50, the stock has a PEG ratio of 1.2, which indicates it could be overvalued. But it also has a secure dividend yield of 1%. The forward P/E of over 18 is higher than I’d like, but the company is well positioned to take advantage of 5% to 6% growth in intermodal freight volume this year. My price target on JBHT is $59.50.
CSX (NYSE:CSX). The King of Value Investors, Warren Buffett, loves railroads — and when his Berkshire Hathaway (NYSE:BRK.A) bought Burlington Northern Santa Fe back in 2009, that move boosted share prices throughout the freight rail sector. Analysts expect CSX, which next reports on Oct. 16, to post earnings of 44 cents a share. That’s not bad considering that coal volumes, which account for almost a third of CSX’s business, have tumbled precipitously due to mild weather and cheap natural gas.
While domestic coal shipments aren’t expected to rebound anytime soon, that’s not the whole story. CSX, which operates the largest freight rail line in the eastern U.S., will experience growth from foreign coal shipments, autos and international container volumes, as InvestorPlace’s Sam Collins points out. With a market cap of nearly $22 billion, CSX is trading around $21. It has a PEG ratio of less than 0.8, a forward P/E under 11 and it pays a current dividend yield of 2.6%. My price target on CSX is $25.
Union Pacific (NYSE:UNP). Next week is a big week for freight rail: After CSX, the nation’s largest freight railroad, Union Pacific, reports earnings on Oct. 18. Analysts are expecting EPS of $2.19 a share and recently forecast UNP’s long-term earnings growth at more than 15%.
Union Pacific also is well positioned to reap rewards from intermodal growth — particularly since such shipments on U.S. railroads have hit record volumes in recent weeks, according to the Association of American Railroads (AAR). In the face of higher diesel fuel costs, UNP also is evaluating whether retrofitting locomotives to run on natural gas makes sense to reduce the industry’s largest expense.
With a market cap of nearly $57.3 billion, Union Pacific is trading around $121. It has a PEG ratio of 1, indicating that the stock is fairly valued, and a forward P/E of less than 13. It has a current dividend yield of 2%. My price target on UNP is $130.
Ryder (NYSE:R). The truck-leasing company will report earnings on Oct. 23, and analysts expect EPS of $1.18 for the quarter ended Sept. 30. As the industry leader, Ryder has a different business model than most other transportation companies, but its innovation is a key reason its earnings (and dividends) are likely to keep rolling.
The lion’s share of Ryder’s business comes from its Fleet Management Solutions unit, which includes commercial rentals and generates fuel service profits. The company also competes on the logistics side with its Supply Chain Solutions unit, and its Dedicated Contract Carriage provides trucks and drivers on a contract basis.
With a market cap of nearly $2.2 billion, Ryder is trading around $42. The stock has a PEG ratio of 1, indicating that it’s fairly valued. But in a transport sector with premium valuations, R’s forward P/E of less than 9 is very attractive, as is its 2.9% current dividend yield.
Even with the current economic challenges, I think Ryder has more room to run. My price target is $52.
As of this writing, Susan J. Aluise did not hold a position in any securities mentioned here.