Transportation Sector On The Road To Recovery: 3 Stocks To Buy

It is a widely-circulated news that the headwinds associated with coronavirus have rattled stocks in the transportation space. Precisely, this broadly-diversified sector comprising railroads, truckers, shippers, airlines and package delivery companies among others was hit hard in 2020. However, the easing of coronavirus restrictions and the resultant uptick in economic activities, particularly in the United States, left a bullish impact on the transportation stocks. This is further evidenced by the Zacks Transportation sector’s growth of 8.2% so far this year.

Against this backdrop, let’s delve into the reasons responsible for this bullish price performance.

The improving freight conditions in the United States represent a huge positive for most corners like railroads of the transportation sector. The betterment in the freight scenario can be gauged by the  latest Cass Freight Shipments Index report, according to which shipment volumes increased 27.6% on a year-over-year basis in April. Notably, this record uptick last month was much higher than the 10% year-over-year rise recorded in March. Moreover, strong growth in airfreight revenues is a big boost to the freight forwarding companies in the sector.

The surge in e-commerce demand is aiding companies like FedEx (FDX - Free Report) and United Parcel Service (UPS - Free Report) . Notably, e-commerce refers to the method of buying and selling goods and services via a software platform. With the pandemic showing little signs of subsidence, e-commerce demand is likely to continue soaring in the near term.

The uptick in economic activities and trade volumes is also a huge boon for the shipping stocks, which are responsible for transporting a high proportion of goods involved in world trade. Within the shipping industry, the containership market reflects the brightest spot. The containership market is being aided by increased manufacturing activities in Asia in addition to inventory restocking and greater demand for goods rather than services in Europe and the United States.

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