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Transportation Ex Airline Update For 3/03/17

When I look at the EPS history in the spreadsheet for P/E ratios - I see a higher propensity for negative outcomes in this sector than in (almost) any other sector I follow. (I do track MLPs - and there are a lot of negative DCF changes in that sector - too.) Add to that, the spreads between the high and low projections are atypically high - which also implies higher risk. Add to that, historical earnings projection accuracy in this sector is low - which STRONGLY implies high risk.

So why invest in this sector? There are lots of stocks with high dividend growth. Many of the stocks have strongly out performed the S&P 500 since 2010. It is a sub-sector of the industrials - and I personally need more exposure in that sector if I want a portfolio that looks something like the S&P 500 (and I do). One can find several high "yield + CAGRs" here - but they are not exactly 'CAGRs one can have faith in'.

What does that mean to you? Diversify (and I have not - I own two rails). Own stocks here in smaller allocations (and I have not - both stocks are 1% of my portfolio). To correct these faults - I expect to add FDX and JBHT in the future (high EPS growth, superior Div/EPS ratios, superior earnings projection accuracy, good enough historical price appreciation). I am tempted by UPS due to a decent yield, but its CAGR is falling.

The data:

The coverage universe is based on the dividend paying stocks - ex airlines - in the Dow Jones Transportation Average. I then sought to expand that universe by finding other logical additions. Two non-DJTA member rails were excluded. Genesee & Wyoming (NYSE:GWR) did not pay a dividend and Providence and Worcester Railroad (NASDAQ:PWX) had a tiny market cap; no analyst coverage and a small yield. China's Guangshen Railway Co. (NYSE:GSH) is traded on the NYSE and has a good yield - but the dividend oscillates without upward direction and the company has earnings estimates from only one analyst. Trucking companies Old Dominion Freight Line Inc. (NASDAQ:ODFL) and Swift Transportation Company (SWFT) were excluded due to lack of a dividend. Heartland Express, Inc. (NASDAQ:HTLD) and Werner Enterprises Inc. (NASDAQ:WERN) were excluded due to small dividend yields and no trends in dividend growth. HTLD has a $2.27 billion market cap; coverage by 14 analysts; a high CAGR projection and 0.3% yield. WERN has a $2.06 billion market cap; coverage by 20 analysts; a high CAGR projection and 0.7% yield. Marine transport Kirby Corporation (NYSE:KEX) and Avis Budget Group (NASDAQ:CAR) were excluded due to a lack of a dividend. Railcar maker The Greenbrier Companies (NYSE:GBX) has a $1.52 billion market cap; coverage by 12 analysts; a 12.33% CAGR projection and 1.10% yield. GBX was omitted because it paused paying dividends between 2009 and 2014.
Canadian National Railway (NYSE:CNI), with a $58 billion market cap, and Canadian Pacific Railway (NYSE:CP), with a $35 billion market cap, were added because they are NYSE traded, have acceptable yields and good earnings growth. CNI has coverage by 25 analysts, while CP has coverage by 26. Forward Air Corp. (NASDAQ:FWRD) was added due to a $1.45 billion market cap; coverage by 14 analysts; a high CAGR projection and 0.5% yield. GATX Corp. (GMT) was added due to a $2.83 billion market cap; coverage by 7 analysts; a high CAGR projection and 2% yield. Knight Transportation Inc. (NYSE:KNX) was added due to a $2.56 billion market cap; coverage by 20 analysts; a high CAGR projection and 0.8% yield. Railcar, barge, guardrail and 'aggregate' maker Trinity Industries (NYSE:TRN) was added for its $5.42 billion market cap; coverage by 12 analysts; a 10% CAGR projection and 1.2% yield. Transportation component maker Westinghouse Air Brake (NYSE:WAB) was added due to a $9.25 billion market cap; coverage by 15 analysts; a 14% CAGR projection and 0.25% yield.


Transportation 03-03-17

The Q1-17 dividend is used for yield calculations. All companies have fiscal years that match calendar years - with the one exception of FDX - which starts in June. The change in the price, price + dividend, 2017 EPS projection and target is the change since market's close of 12-31-16. The last three years average dividend growth is calculated by dividing the total dividend growth from Q1-14 to Q1-17 divided by three.

    12-31-16 Current Dividend Current Div/EPS Percent Change Div Growth
Company Price Price /Quarter Yield Ratio Price Pr+Div 17 EPS Target LTM 3 yrs
ArcBest Corporation ARCB 27.65 29.95 0.08 1.07% 21% 8.32 8.32 -1.90 9.65 0.00 55.56
CH Robinson Worldwide, Inc. CHRW 73.26 79.77 0.45 2.26% 49% 8.89 8.89 -0.81 4.54 18.42 9.52
Canadian National Railway CNI 67.40 72.01 0.29 1.62% 31% 6.84 7.27 3.57 7.21 23.16 14.93
Canadian Pacific Railway CP 142.77 149.18 0.39 1.03% 18% 4.49 4.49 -2.23 -0.16 52.78 5.56
CSX Corp. CSX 35.93 49.48 0.18 1.46% 36% 37.71 37.71 1.01 37.20 0.00 6.67
Expeditors International EXPD 52.96 56.50 0.20 1.42% 32% 6.68 6.68 0.40 8.15 11.11 11.11
FedEx Corporation FDX 186.20 194.35 0.40 0.82% 13% 4.38 4.38 -0.08 0.55 60.00 55.56
Forward Air Corp. FWRD 47.38 48.40 0.15 1.24% 26% 2.15 2.15 0.00 6.21 25.00 16.67
GATX Corp. GATX 61.58 58.99 0.40 2.71% 36% -4.21 -4.21 0.22 6.95 5.26 9.68
JB Hunt Transport JBHT 97.07 97.85 0.22 0.90% 21% 0.80 1.03 -0.72 7.58 4.76 15.56
Kansas City Southern KSU 84.85 89.50 0.33 1.47% 26% 5.48 5.48 -2.13 -2.21 0.00 17.83
Knight Transportation Inc. KNX 33.05 32.55 0.06 0.74% 20% -1.51 -1.33 -9.23 3.78 0.00 0.00
Landstar System, Inc. LSTR 85.30 87.25 0.09 0.41% 10% 2.29 2.29 0.29 7.98 12.50 16.67
Matson, Inc. MATX 35.39 34.10 0.19 2.23% 47% -3.65 -3.65 -21.08 -4.40 5.56 6.25
Norfolk Southern Corp. NSC 108.07 122.40 0.59 1.93% 38% 13.26 13.81 0.82 12.89 0.00 4.49
Ryder System. Inc. R 74.44 76.86 0.44 2.29% 34% 3.25 3.25 -13.07 0.17 7.32 9.80
Trinity Industries Inc. TRN 27.76 26.85 0.11 1.64% 36% -3.28 -3.28 -1.60 15.52 0.00 15.56
Union Pacific Corp. UNP 103.68 109.02 0.60 2.22% 43% 5.15 5.73 1.08 8.23 10.00 17.72
United Parcel Service, Inc UPS 117.64 105.93 0.78 2.95% 52% -9.95 -9.95 -3.57 -1.84 6.85 8.60
Westinghouse Air Brake WAB 83.02 79.89 0.10 0.50% 10% -3.77 -3.77 -7.23 -0.99 25.00 50.00
Average         1.55% 30% 4.17 4.26 -2.81 6.35 13.39
The ^DJT or Dow Jones Transportation Average has changed 4.95% year to date.
The IYT or iShares Transportation Average - with unreinvested dividends - has changed 5.13% year to date.
The SPY or S&P 500 EFT has changed 1.42% year to date.
The SPY or S&P 500 EFT - with unreinvested dividends - has changed 1.42% year to date.
With the 10 Treasury at 2.46% and the sector average yield on Q4 Dividends at 1.55% - the spread is -64 basis points.
The number for the first dividend change is for the last twelve months and not year to date. The second change is a 3 year average.

Price/Earnings Ratios 03-03
All companies have fiscal years that match calendar years - with the one exception of FDX - which starts in June.
Stocks with large spreads between the high and low projections have varied each of the three quarters that metric has been tracked
Nasdaq lacked current 2019 projections for FWRD, GATX, R & TRN - I provided guesstimates, some based on prior projections no longer showing

  EPS / Share % EPS Growth Price/EPS 17 EPS Range
Co. 2014 2015 2016 2017 2018 2019 14-15 15-16 16-17 17-18 2016 2017 2018 High/ Low Range
ARCB 1.82 1.78 0.93 1.55 1.91 2.23 -2.20 -47.75 66.67 23.23 32.20 19.32 15.68 1.80 1.43 39.78%
CHRW 3.05 3.51 3.59 3.68 3.94 4.04 15.08 2.28 2.51 7.07 22.22 21.68 20.25 4.10 3.45 18.11%
CNI 3.76 4.44 3.43 3.77 4.03 4.55 18.09 -22.75 9.91 6.90 20.99 19.10 17.87 3.83 3.57 7.58%
CP 8.50 10.10 7.68 8.75 9.60 11.57 18.82 -23.96 13.93 9.71 19.42 17.05 15.54 8.81 8.25 7.29%
CSX 1.92 2.00 1.81 2.01 2.27 2.37 4.17 -9.50 11.05 12.94 27.34 24.62 21.80 2.07 1.70 20.44%
EXPD 1.92 2.39 2.36 2.50 2.72 2.93 24.48 -1.26 5.93 8.80 23.94 22.60 20.77 2.60 2.40 8.47%
FDX 6.75 8.95 10.80 11.97 13.47 14.76 32.59 20.67 10.83 12.53 18.00 16.24 14.43 12.31 10.80 13.98%
FWRD 1.96 2.25 2.08 2.33 2.63 2.70 14.80 -7.56 12.02 12.88 23.27 20.77 18.40 2.75 2.20 26.44%
GATX 4.48 5.37 5.77 4.49 4.10 3.99 19.87 7.45 -22.18 -8.69 10.22 13.14 14.39 4.60 4.40 3.47%
JBHT 3.16 3.66 3.73 4.16 4.77 5.37 15.82 1.91 11.53 14.66 26.23 23.52 20.51 4.35 3.95 10.72%
KSU 4.82 4.49 4.48 5.06 5.64 6.14 -6.85 -0.22 12.95 11.46 19.98 17.69 15.87 5.35 4.80 12.28%
KNX 1.25 1.47 1.17 1.18 1.42 1.68 17.60 -20.41 0.85 20.34 27.82 27.58 22.92 1.25 1.05 17.09%
LSTR 3.07 3.37 3.25 3.46 3.90 4.19 9.77 -3.56 6.46 12.72 26.85 25.22 22.37 3.55 3.35 6.15%
MATX 1.63 2.89 1.85 1.61 1.86 2.01 77.30 -35.99 -12.97 15.53 18.43 21.18 18.33 1.62 1.58 2.16%
NSC 6.39 5.10 5.62 6.14 6.86 7.35 -20.19 10.20 9.25 11.73 21.78 19.93 17.84 6.50 5.50 17.79%
R 5.58 6.13 5.77 5.19 5.77 6.20 9.86 -5.87 -10.05 11.18 13.32 14.81 13.32 5.25 5.13 2.08%
TRN 4.19 4.87 2.25 1.23 1.14 1.10 16.23 -53.80 -45.33 -7.32 11.93 21.83 23.55 1.41 1.15 11.56%
UNP 5.75 5.49 5.07 5.64 6.36 6.97 -4.52 -7.65 11.24 12.77 21.50 19.33 17.14 6.10 4.90 23.67%
UPS 4.75 5.43 5.75 5.95 6.45 6.40 14.32 5.89 3.48 8.40 18.42 17.80 16.42 6.06 5.79 4.70%
WAB 3.62 4.10 3.85 3.98 4.59 5.88 13.26 -6.10 3.38 15.33 20.75 20.07 17.41 4.10 3.75 9.09%
Average           14.41 -9.90 5.07 10.61 21.23 20.17 18.24    

. . . and a bonus spreadsheet

Ask these questions before you look at the data: "If you can not trust the EPS projection - can a P/E ratio ever be a meaningful metric? If you can not trust the EPS projection - can dividend coverage be a meaningful metric in assessing risk when it comes to the dividend? If you can not trust the EPS projection - then can you have much trust in the CAGR?

Intra-year Changes in EPS estimates during the Year:
Some companies have assets or business models that produce more predictable EPS projections
  2013 2014 2015 2016 2017 Accuracy 17 EPS
Company and Ticker Beginning Ending Change Beginning Ending Change Beginning Ending Change Beginning Ending Change Beginning Current Change Rating Spread
ArcBest Corporation ARCB 2.00 0.61 -69.5% 2.00 1.82 -9.0% 2.51 1.78 -29.1% 2.36 0.93 -60.6% 1.58 1.55 -1.9% 5.0 39.8%
CH Robinson Worldwide, Inc. CHRW 2.65 2.65 0.0% 2.80 3.05 8.9% 3.36 3.51 4.5% 3.76 3.59 -4.5% 3.71 3.68 -0.8% 1.0 18.1%
Canadian National Railway CNI 3.06 3.06 0.0% 3.49 3.76 7.7% 4.22 4.44 5.2% 4.72 3.43 -27.3% 3.64 3.77 3.6% 3.0 7.6%
Canadian Pacific Railway CP 6.42 6.42 0.0% 8.53 8.50 -0.4% 11.13 10.10 -9.3% 11.52 7.68 -33.3% 8.95 8.75 -2.2% 4.0 7.3%
CSX Corp. CSX 1.83 1.83 0.0% 1.90 1.92 1.1% 2.17 2.00 -7.8% 2.04 1.81 -11.3% 1.99 2.01 1.0% 3.0 20.4%
Expeditors International EXPD 1.68 1.68 0.0% 1.90 1.92 1.1% 2.10 2.39 13.8% 2.51 2.36 -6.0% 2.49 2.50 0.4% 1.5 8.5%
FedEx Corporation FDX 6.23 6.23 0.0% 6.98 6.75 -3.3% 8.98 8.95 -0.3% 10.57 10.80 2.2% 11.98 11.97 -0.1% 1.0 14.0%
Forward Air Corp. FWRD 1.77 1.77 0.0% 2.18 1.96 -10.1% 2.41 2.25 -6.6% 2.61 2.08 -20.3% 2.33 2.33 0.0% 3.0 26.4%
GATX Corp. GATX 3.50 3.50 0.0% 3.98 4.48 12.6% 5.12 5.37 4.9% 5.28 5.77 9.3% 4.48 4.49 0.2% 1.0 3.5%
JB Hunt Transport JBHT 2.87 2.87 0.0% 3.33 3.16 -5.1% 3.63 3.66 0.8% 4.06 3.73 -8.1% 4.19 4.16 -0.7% 1.5 10.7%
Kansas City Southern KSU 3.98 3.98 0.0% 4.60 4.82 4.8% 5.51 4.49 -18.5% 4.76 4.48 -5.9% 5.17 5.06 -2.1% 3.0 12.3%
Knight Transportation Inc. KNX 0.86 0.86 0.0% 0.99 1.25 26.3% 1.37 1.47 7.3% 1.48 1.17 -20.9% 1.30 1.18 -9.2% 3.5 17.1%
Landstar System, Inc. LSTR 2.42 2.42 0.0% 2.81 3.07 9.3% 3.47 3.37 -2.9% 3.60 3.25 -9.7% 3.45 3.46 0.3% 1.7 6.2%
Matson, Inc. MATX 1.39 1.39 0.0% 1.34 1.63 21.6% 1.68 2.89 72.0% 2.84 1.85 -34.9% 2.04 1.61 -21.1% 4.0 2.2%
Norfolk Southern Corp. NSC 5.85 5.85 0.0% 6.45 6.39 -0.9% 7.26 5.10 -29.8% 5.73 5.62 -1.9% 6.09 6.14 0.8% 3.0 17.8%
Ryder System. Inc. R 4.88 4.88 0.0% 5.42 5.58 3.0% 6.50 6.13 -5.7% 6.79 5.77 -15.0% 5.97 5.19 -13.1% 3.5 2.1%
Trinity Industries Inc. TRN 4.88 2.34 -52.0% 4.19 4.19 0.0% 4.42 4.87 10.2% 3.74 2.25 -39.8% 1.25 1.23 -1.6% 5.0 11.6%
Union Pacific Corp. UNP 4.71 4.71 0.0% 5.41 5.75 6.3% 6.48 5.49 -15.3% 6.00 5.07 -15.5% 5.58 5.64 1.1% 3.5 23.7%
United Parcel Service, Inc UPS 4.57 4.57 0.0% 5.23 4.75 -9.2% 5.65 5.43 -3.9% 5.77 5.75 -0.3% 6.17 5.95 -3.6% 2.0 4.7%
Westinghouse Air Brake WAB 2.15 3.01 40.0% 2.93 3.62 23.5% 4.05 4.10 1.2% 4.47 3.85 -13.9% 4.29 3.98 -7.2% 3.0 9.1%

Disclosure: I am/we are long NSC, UNP.