Despite macroeconomic challenges, the logistics industry is well-positioned for solid growth because air freight is vital for global trade, and the e-commerce sector is expected to boost the industry’s prospects due to the growing demand for fast and reliable transportation services.
Considering these factors, it could be wise to buy fundamentally strong logistics stocks Radiant Logistics, Inc. (RLGT), AerCap Holdings N.V. (AER), and FedEx Corporation (FDX). These stocks are Buy-rated in our proprietary POWR Ratings system.
Before diving deeper into their fundamentals, let’s discuss why the logistics industry is well-positioned for growth.
The growth in the logistics industry has been driven by increasing demand for efficient global transportation, e-commerce expansion, rising international trade, technological advancements, and the growth of the aviation sector.
Despite facing challenges of falling trade volumes, the slowdown in economic activity, etc., during the pandemic, the logistics industry has made a strong comeback as businesses expand their global reach, consumer spending grows over time, and spending on e-commerce continues to rise.
Moreover, the use of emerging technologies like the Internet of Things (IoT), artificial intelligence (AI), and machine learning (ML) will help improve supply chain visibility, optimize routes, reduce costs, and improve efficiencies.
The global air freight market size is estimated at $142.77 billion this year and is expected to grow at a CAGR of 5.9% to reach $190.30 billion by 2028.
Considering these conducive trends, let’s analyze the fundamental aspects of the three Air Freight & Shipping Services picks, beginning with the third choice.
Stock #3: Radiant Logistics, Inc. (RLGT)
RLGT provides technology-enabled global transportation and value-added logistics solutions. It offers domestic, international air, and ocean freight forwarding services; and freight brokerage services, including truckload and intermodal services. In addition, the company also provides logistics and supply chain services.
On August 14, 2023, RLGT announced the opening of a new company-owned location in Kansas City, Missouri, named Radiant Global Logistics (RGL-MKC). This location will offer specialized first and final-mile control tower solutions for commercial and residential services across North America.
On June 1, 2023, RLGT announced the expansion of its Service by Air (SBA) network with a new location in Boston, Massachusetts. Leveraging RLGT’s advanced technology platform, purchasing influence, and extensive global network, the Boston location will provide a comprehensive range of domestic and international freight forwarding and logistics services.
In terms of the trailing-12-month levered FCF margin, RLGT’s 8.44% is 51.9% higher than the 5.56% industry average. Likewise, its 5.23% trailing-12-month Return on Total Assets is 2.9% higher than the 5.08% industry average. Additionally, its 2.44x trailing-12-month asset turnover ratio is 200.2% higher than the 0.81x industry average.
For the fiscal year ended June 30, 2023, RLGT’s revenues came in at $1.09 billion. Its income from operations for the period came in at $28.12 million. The company’s net income attributable to RLGT came in at $20.60 million. Also, its income per share came in at $0.42. In addition, its net cash provided by operating activities rose 293.5% year-over-year to $97.90 million.
Street expects RLGT’s revenue for the quarter ending March 31, 2024, to increase 10% year-over-year to $268.60 million. It surpassed the consensus EPS estimates in three of the four trailing quarters. The stock has gained 13% year-to-date to close the last trading session at $5.75.
RLGT’s positive outlook is reflected in its POWR Ratings. It has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Value and a B for Quality. It is ranked #3 out of 14 stocks in the B-rated Air Freight & Shipping Services industry. To see RLGT’s Growth, Momentum, Stability, and Sentiment ratings, click here.
Stock #2: AerCap Holdings N.V. (AER)
Headquartered in Dublin, Ireland, AER engages in the lease, financing, sale, and management of commercial flight equipment in China, Hong Kong, Macau, the United States, Ireland, and internationally.
On June 28, 2023, AER announced lease placements with Airlink, Southern Africa's largest regional airline, for three used Embraer E195-E1 aircraft. The first is already delivered, and the others are in July 2023.
Peter Anderson, the Chief Commercial Officer at AER, said, "We are very pleased to welcome Airlink as a new customer to AerCap with the lease of three E195 aircraft. We wish all the team at Airlink every success and look forward to working with them for many years to come."
In terms of the trailing-12-month EBIT margin, AER’s 49.10% is 403.9% higher than the 9.74% industry average. Likewise, its 49.49% trailing-12-month EBITDA margin is 266.1% higher than the 13.52% industry average. Additionally, its 25.55% trailing-12-month net income margin is 309.8% higher than the 6.23% industry average.
AER’s total revenues for the second quarter ended June 30, 2023, increased 15.2% year-over-year to $1.92 billion. Its net income attributable to AER increased 45% year-over-year to $492.89 million. The company’s EPS came in at $2.12, representing an increase of 51.4% year-over-year.
For the quarter ending September 30, 2023, AER’s EPS and revenue are expected to increase 0.2% and 9.5% year-over-year to $1.82 and $1.89 billion, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 50.8% to close the last trading session at $63.02.
AER’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It is ranked #2 in the same industry. It has a B grade for Sentiment and Quality. Click here to see AER’s Growth, Value, Momentum, and Stability ratings.
Stock #1: FedEx Corporation (FDX)
Headquartered in Memphis, Tennessee, FDX provides transportation, e-commerce, and business services in the United States and internationally. It operates through FedEx Express, FedEx Ground, FedEx Freight, and FedEx Services segments.
In terms of the trailing-12-month Return on Common Equity margin, FDX’s 16.14% is 18.7% higher than the 13.60% industry average. Likewise, its 6.98% trailing-12-month Capex/Sales is 137.2% higher than the 2.94% industry average. Additionally, its 1.02x trailing-12-month asset turnover ratio is 25.9% higher than the 0.81x industry average.
FDX’s net sales for the fiscal first quarter that ended August 31, 2023, came in at $21.68 billion. It adjusted operating income increased 29.4% year-over-year to $1.59 billion. The company’s adjusted net income increased 28.1% year-over-year to $1.16 billion. In addition, its adjusted EPS came in at $4.55, representing an increase of 32.3% year-over-year.
Analysts expect FDX’s EPS for the quarter ending November 30, 2023, to increase 30.5% year-over-year to $4.15. Likewise, its revenue for the quarter ending February 28, 2023, is expected to increase 2.3% year-over-year to $22.67 billion. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 81.2% to close the last trading session at $262.71.
FDX’s POWR Ratings reflect solid prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It is ranked first in the Air Freight & Shipping Services industry. It has an A grade for Sentiment and a B for Quality. To see FDX’s Growth, Value, Momentum, and Stability ratings, click here.
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FDX shares were trading at $266.87 per share on Thursday afternoon, up $4.16 (+1.58%). Year-to-date, FDX has gained 56.58%, versus a 13.54% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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