As more industries continue to recover from the COVID-19 pandemic, the best transportation stocks are picking up speed. This is causing the stock market to return the favor.
Recent events, like the $1.8 billion that was given to Rebuilding American Infrastructure with Sustainability and Equity (RAISE) grant projects during the Biden-Harris era, are also making the best transportation stocks more appealing.
Changes to laws and rules include attempts to change California’s Private Attorneys General Act (PAGA) Act, which targets the trucking business, and a $200 million part of a U.S. House bill that deals with the problem of truck parking.
The S-connection Project in North Carolina is also working on a number of other projects. Its goal is to use clever design to make the train link between Raleigh and Richmond faster for passengers.
More importantly, even though this summer has been a record-breaking time for plane travel, the Department of Transportation has seen fewer cancellations and better security for passengers.
Also, airport infrastructure is experiencing heavy investment. Over $123 million is given to 235 airports across the country for safety and renovation projects.
However, despite these positive developments, when choosing stocks from the transportation sector, it’s important to buy those with good revenue growth rates, positive analyst reviews and at least a 10% possible upside.
Delta Air Lines (DAL)
Delta Air Lines (NYSE:DAL) is getting rewarded for its cost management and efficiency efforts, with shares up 20%. From the last close of $47, the average target price is $62, a potential upside of 33%.
DAL beat revenue expectations with $9.35 billion in the first quarter of 2024 despite increased fuel costs; it’s the ninth time this happened in the last 12 quarters. The airline predicted a strong second quarter and profitability with rising ticket sales. Delta’s first-quarter operating cash flow was $2.4 billion, with $712 million spent on debt and lease.
Delta’s management sees a bright future based on record income and profitability in the June quarter and year-end. The International Air Transport Association’s 2024 revenue forecast supports this narrative.
From Minneapolis-St. Paul, Delta is to run its biggest-ever winter Latin program featuring additional flights to Aruba and St. Maarten and more services to Grand Cayman and San Juan.
Delta is also continuously improving its premium travel choices, which consist of Missoni partnerships and the Delta One Lounge opening at JFK. Furthermore, significant alliances like LATAM for Copa América 2024 support DAL’s market attractiveness among the best transportation stocks.
American Airlines Group (AAL)
American Airlines Group (NASDAQ:AAL) reported record first-quarter revenue of $12.6 billion, rising gasoline costs notwithstanding, but missed earnings estimates by 16%, leading to a sell-off. Nonetheless, operational effectiveness enabled the airline to lower lost baggage and reach its best-ever first-quarter completion rate. One of the finest transportation companies to purchase after cutting debt by $950 million in Q1, analysts are forecasting an upside of nearly 42%.
American Airlines’ sales reached a record $53 billion in 2023. Two million of its flights were filled, and AAL is en route to meeting its targets for 2025 after cutting debt by $3.2 billion in 2023.
To complement its transatlantic schedule for summer 2024, American Airlines indicated it will increase daily flights to Copenhagen, Naples, and Nice. Along with increasing flights to European sites, the airline is improving service to Mexico, the Caribbean and Latin America.
American Airlines CEO Robert Isom and others underlined at 2024 Investor Day the airline’s successes and aims including debt reduction, free cash flow and margin improvement. AAL also emphasized modern fleets, AAdvantage travel advantages and operational effectiveness.
United Parcel Service (UPS)
United Parcel Service‘s (NYSE:UPS) 2026 strategic objectives are an adjusted operating profit above 13% and combined revenues of $108 billion to $114 billion. Between 2024 and 2026, the corporation will spend 5.5% of sales on capex as UPS cements itself among the best transportation stocks.
Apart from the robust outlook, UPS holds a record of keeping or increasing its payout every year since its 1999 IPO. Adding to UPS’s credentials is a potential upside of over 20% based on a target of $162.65.
What’s more, UPS and USPS are expanding their cooperation. Hired to replace USPS’s main air cargo supplier, UPS has strengthened its connection and enhanced air goods traffic throughout the United States.
Additionally expanding is UPS’s Digital Access Program, which collaborates with well-known e-commerce websites such as Stamps.com, offering reduced shipping costs by combining UPS services with well-known e-commerce systems.
In addition, services to SMBs are expanding, including the growth of My Choice’s business around the world, the addition of more remote access points, the combination of the UPS Digital Access Program with Square Online Store and the spread of UPS Extended Hours service.
Finally, UPS and the International Brotherhood of Teamsters have signed a five-year agreement that covers about 330,000 American workers. This is good news for UPS’s supply chain team. Teamsters were happy with a provisional agreement that is essential for UPS operations to run smoothly.
On the date of publication, Faizan Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
