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Transportation Sector Update 5/17/19

|About: FedEx Corporation (FDX), R, UPS
Summary

Many components are at low P/E ratios.

Many components are key parts of the total industrial sector.

Many components have reasonable dividends at high dividend growth rates.

The coverage universe, built in early 2014, 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 (GWR) did not pay a dividend and Providence and Worcester Railroad (PWX) is now part of GWR China's Guangshen Railway Co. (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. (ODFL - first div in Q1-17 with good yearly increases 10-> 13 -> 17) and Swift Transportation Company (SWFT - still no div) were excluded due to lack of a dividend. Heartland Express, Inc. (HTLD) was excluded due to small dividend yield and no trend in div growth. HTLD has a $2.27 billion market cap; coverage by 14 analysts; and a 0.3% yield without recent growth). Werner Enterprises Inc. (WERN) has a $2.35 billion market cap; coverage by 19 analysts; a 18% CAGR (or compound annual growth rate of the dividend) projection and 1% yield and needs to be added. Marine transport Kirby Corporation (KEX) and Avis Budget Group (CAR) were excluded due to a lack of a dividend. Rail-car maker The Greenbrier Companies (GBX) has a $1.02 billion market cap; coverage by 8 analysts; a 7.03% CAGR projection and 2.8% yield - may be added. GBX was omitted because it paused paying dividends between 2009 and 2014 - but has div growth since 2014. Canadian National Railway (CNI), with a $58 billion market cap, and Canadian Pacific Railway (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. (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. (GATX) was added due to a $2.83 billion market cap; coverage by 7 analysts; a high CAGR projection and 2% yield. Knight Transportation Inc. (KNX) was added due to a $2.56 billion market cap; coverage by 20 analysts; a high CAGR projection and 0.8% yield. Rail-car, barge, guardrail and 'aggregate' maker Trinity Industries (TRN) was added for its $5.42 billion market cap; coverage by 12 analysts; a 10% CAGR projection and 2.5% yield. Transportation component maker Westinghouse Air Brake -> Wabtec (WAB) was added due to a $12 billion market cap; coverage by 10 analysts; a 14% CAGR projection and 0.65% yield.

Transportation 05-17-19

The Q1-19 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, 2019 EPS projection and target is the change since market's close of 12-31-18. The last three years average dividend growth is calculated by dividing the total dividend growth from Q3-15 to Q3-18 divided by three. LTM = last twelve months. Targets are from Yahoo.

Many of these stocks are priced at low valuations. Some historical context on valuations:

Long term valuation trends The P/E calculation is for the year's beginning price dividend by ending EPS. The yield is Q1 dividend times four, dividend by beginning of the year price.

Co. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
ARCB EPS 3.16 2.23 1.14 0.10 0.10 0.23 0.10 0.61 1.82 1.78 0.93 1.33 3.86 3.49 3.62
Price 43.68 36.00 21.94 30.11 29.43 27.42 19.27 9.55 33.68 46.37 21.39 27.65 35.75 34.26
P/E 13.82 16.14 19.25 301.10 294.30 119.22 192.70 15.66 18.51 26.05 23.00 20.79 9.26 9.82
Div 0.60 0.60 0.60 0.60 0.12 0.12 0.12 0.12 0.12 0.24 0.32 0.32 0.32 0.32
Yield 1.37 1.67 2.73 1.99 0.41 0.44 0.62 1.26 0.36 0.52 1.50 1.16 0.90 0.93
Co. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
CHRW EPS 1.53 1.86 2.08 2.13 2.33 2.62 3.67 2.65 3.05 3.51 3.59 3.35 4.73 4.98 5.22
Price 69.78 40.89 54.12 55.03 58.73 80.18 69.78 63.22 58.35 74.89 62.02 73.26 89.09 84.09
P/E 45.61 21.98 26.02 25.84 25.21 30.60 19.01 23.86 19.13 21.34 17.28 21.87 18.84 16.89
Div 0.52 0.72 0.88 0.96 1.00 1.16 1.32 1.40 1.40 1.52 1.72 1.80 1.84 2.00
Yield 0.75 1.76 1.63 1.74 1.70 1.45 1.89 2.21 2.40 2.03 2.77 2.46 2.07 2.38
Co. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
CNI EPS 3.36 4.28 3.25 3.74 2.24 2.70 3.06 3.06 3.76 4.44 3.43 3.96 4.11 4.64 5.19
Price 21.15 21.15 23.46 18.37 29.16 33.23 29.16 27.82 57.02 68.91 55.88 67.40 82.50 74.11
P/E 6.29 4.94 7.22 4.91 13.02 12.31 9.53 9.09 15.16 15.52 16.29 17.02 20.07 15.97
Div 0.29 0.36 0.46 0.39 0.52 0.67 0.75 0.83 0.91 1.00 1.11 1.24 1.41 1.37
Yield 1.35 1.68 1.98 2.13 1.80 2.02 2.58 3.00 1.59 1.45 1.98 1.84 1.71 1.85
Co. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
CP EPS 4.31 6.12 3.28 3.50 3.85 3.34 2.79 6.42 8.50 10.10 7.68 9.04 10.83 12.19 13.81
Price 52.76 52.76 64.64 33.62 54.00 64.81 129.16 127.82 151.32 192.69 127.60 142.77 182.76 177.62
P/E 12.24 8.62 19.71 9.61 14.03 19.40 46.29 19.91 17.80 19.08 16.61 15.79 16.88 14.57
Div 0.64 0.78 0.98 0.81 0.97 1.11 1.21 1.37 1.25 1.12 1.05 1.50 1.75 1.96
Yield 1.21 1.47 1.52 2.40 1.79 1.71 0.94 1.07 0.83 0.58 0.82 1.05 0.96 1.10
Co. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
CSX EPS 1.00 0.96 1.24 0.96 1.35 1.67 1.79 1.83 1.92 2.00 1.81 2.30 3.85 4.38 4.81
Price 21.06 11.47 14.66 10.82 16.16 21.53 21.06 19.73 28.77 36.23 25.95 35.93 55.01 62.13
P/E 21.06 11.95 11.82 11.27 11.97 12.89 11.77 10.78 14.98 18.11 14.34 15.62 14.29 14.18
Div 0.20 0.24 0.24 0.24 0.24 0.32 0.48 0.56 0.60 0.64 0.72 0.72 0.88 0.96
Yield 0.95 2.09 1.64 2.22 1.49 1.49 2.28 2.84 2.09 1.77 2.77 2.00 1.60 1.55
Co. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
EXPD EPS 1.06 1.21 1.37 1.11 1.59 1.79 1.57 1.68 1.92 2.39 2.36 2.36 3.48 3.54 3.76
Price 67.51 40.50 44.68 33.27 34.77 54.60 40.96 39.55 44.25 44.61 45.10 52.96 64.69 68.09
P/E 63.69 33.47 32.61 29.97 21.87 30.50 26.09 23.54 23.05 18.67 19.11 22.44 18.59 19.23
Div 0.15 0.28 0.32 0.38 0.40 0.50 0.56 0.60 0.64 0.64 0.72 0.80 0.84 0.90
Yield 0.22 0.69 0.72 1.14 1.15 0.92 1.37 1.52 1.45 1.43 1.60 1.51 1.30 1.32
Co. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
FDX EPS 5.83 6.48 3.60 0.31 3.76 4.57 6.41 6.23 6.75 8.95 10.80 12.30 15.31 15.48 16.76
Price 103.39 108.62 89.17 64.15 83.45 93.01 83.51 91.72 143.77 173.66 148.99 186.20 249.54 161.33
P/E 17.73 16.76 24.77 206.94 22.19 20.35 13.03 14.72 21.30 19.40 13.80 15.14 16.30 10.42
Div 0.32 0.36 0.40 0.44 0.44 0.48 0.52 0.56 0.60 0.80 1.00 1.60 2.00 2.60
Yield 0.31 0.33 0.45 0.69 0.53 0.52 0.62 0.61 0.42 0.46 0.67 0.86 0.80 1.61
Co. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
FWRD EPS 1.55 1.50 1.47 0.34 1.10 1.60 1.50 1.77 1.96 2.25 2.08 2.34 3.12 3.29 3.70
Price 36.65 28.93 31.17 24.27 25.03 28.38 32.05 35.01 43.91 50.37 43.01 47.38 57.44 54.85
P/E 23.65 19.29 21.20 71.38 22.75 17.74 21.37 19.78 22.40 22.39 20.68 20.25 18.41 16.67
Div 0.28 0.28 0.28 0.28 0.28 0.28 0.28 0.40 0.40 0.48 0.48 0.60 0.60 0.72
Yield 0.76 0.97 0.90 1.15 1.12 0.99 0.87 1.14 0.91 0.95 1.12 1.27 1.04 1.31
Co. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
GATX EPS 2.65 3.44 3.88 1.70 1.72 2.35 2.88 3.50 4.48 5.37 5.77 4.70 5.22 5.02 5.20
Price 36.08 43.33 36.68 30.97 28.75 35.28 43.66 43.30 52.17 57.54 42.55 61.58 62.16 70.81
P/E 13.62 12.60 9.45 18.22 16.72 15.01 15.16 12.37 11.65 10.72 7.37 13.10 11.91 14.11
Div 0.84 0.96 1.08 1.12 1.12 1.16 1.20 1.24 1.32 1.52 1.60 1.68 1.76 1.84
Yield 2.33 2.22 2.94 3.62 3.90 3.29 2.75 2.86 2.53 2.64 3.76 2.73 2.83 2.60
Co. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
JBHT EPS 1.44 1.55 1.56 1.05 1.56 2.11 2.59 2.87 3.16 3.66 3.73 3.58 5.69 5.74 6.47
Price 22.64 20.77 27.55 26.27 32.27 40.81 45.07 59.71 77.30 84.25 73.36 97.07 114.98 93.04
P/E 15.72 13.40 17.66 25.02 20.69 19.34 17.40 20.80 24.46 23.02 19.67 27.11 20.21 16.21
Div 0.32 0.36 0.40 0.44 0.48 0.52 0.56 0.60 0.80 0.84 0.88 0.92 0.96 1.04
Yield 1.41 1.73 1.45 1.67 1.49 1.27 1.24 1.00 1.03 1.00 1.20 0.95 0.83 1.12
Co. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
KSU EPS 1.13 1.64 1.86 0.61 1.57 2.99 3.43 3.98 4.82 4.49 4.48 5.25 5.97 6.83 7.75
Price 24.43 28.98 34.33 19.05 33.29 47.86 68.01 83.48 123.83 122.03 74.67 84.85 105.22 95.45
P/E 21.62 17.67 18.46 31.23 21.20 16.01 19.83 20.97 25.69 27.18 16.67 16.16 17.62 13.98
Div 0.00 0.00 0.00 0.00 0.00 0.00 0.76 0.86 1.12 1.32 1.32 1.32 1.44 1.44
Yield 0.00 0.00 0.00 0.00 0.00 0.00 1.12 1.03 0.90 1.08 1.77 1.56 1.37 1.51
Co. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
KNX EPS 0.84 0.72 0.66 0.60 0.70 0.74 0.80 0.86 1.25 1.47 1.17 1.38 2.56 2.66 2.83
Price 15.84 17.05 14.81 15.84 19.29 19.00 15.64 18.89 18.34 33.66 24.23 33.05 43.72 25.07
P/E 18.86 23.68 22.44 26.40 27.56 25.68 19.55 21.97 14.67 22.90 20.71 23.95 17.08 9.42
Div 0.08 0.12 0.12 0.16 0.20 0.24 0.24 0.24 0.24 0.24 0.24 0.24 0.24 0.24
Yield 0.51 0.70 0.81 1.01 1.04 1.26 1.53 1.27 1.31 0.71 0.99 0.73 0.55 0.96
Co. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
LSTR EPS 1.93 1.99 2.10 1.37 1.77 2.38 2.77 2.42 3.07 3.37 3.25 3.75 6.18 6.41 6.70
Price 41.74 38.18 42.15 38.77 38.43 40.94 47.92 52.46 57.45 72.53 58.65 85.30 104.10 95.67
P/E 21.63 19.19 20.07 28.30 21.71 17.20 17.30 21.68 18.71 21.52 18.05 22.75 16.84 14.93
Div 0.10 0.12 0.15 0.16 0.18 0.20 0.22 0.24 0.24 0.28 0.32 0.36 0.60 0.66
Yield 0.24 0.31 0.36 0.41 0.47 0.49 0.46 0.46 0.42 0.39 0.55 0.42 0.58 0.69
Co. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
MATX EPS 2.14 2.52 1.69 0.80 1.70 1.09 1.22 1.39 1.63 2.89 1.85 1.85 2.53 2.35 2.65
Price 27.12 22.17 25.83 12.53 17.11 20.02 20.41 24.72 26.11 34.52 42.63 35.39 29.84 32.02
P/E 12.67 8.80 15.28 15.66 10.06 18.37 16.73 17.78 16.02 11.94 23.04 19.13 11.79 13.63
Div 0.43 0.48 0.56 0.60 0.60 0.60 0.60 0.60 0.64 0.68 0.72 0.76 0.80 0.84
Yield 1.59 2.17 2.15 4.82 3.53 3.02 2.96 2.43 2.45 1.97 1.69 2.15 2.68 2.62
Co. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
NSC EPS 3.57 3.68 4.52 2.76 4.00 5.45 5.37 5.85 6.39 5.10 5.62 6.61 9.51 10.94 12.36
Price 44.83 50.29 50.44 47.05 52.42 62.82 72.86 61.84 92.83 109.61 84.59 108.07 144.90 149.54
P/E 12.56 13.67 11.16 17.05 13.11 11.53 13.57 10.57 14.53 21.49 15.05 16.35 15.24 13.67
Div 0.64 0.88 1.16 1.36 1.36 1.60 1.88 2.00 2.16 2.36 2.36 2.44 2.88 3.44
Yield 1.43 1.75 2.30 2.89 2.59 2.55 2.58 3.23 2.33 2.15 2.79 2.26 1.99 2.30
Co. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
R EPS 4.10 4.46 4.55 1.74 2.37 3.31 3.91 4.88 5.58 6.13 5.77 4.53 5.79 6.17 6.67
Price 53.14 51.06 47.01 38.78 42.23 52.64 53.14 49.93 73.78 92.85 56.83 74.44 84.17 48.15
P/E 12.96 11.45 10.33 22.29 17.82 15.90 13.59 10.23 13.22 15.15 9.85 16.43 14.54 7.80
Div 0.64 0.84 0.92 0.92 1.08 1.08 1.16 1.24 1.36 1.48 1.64 1.76 2.08 2.16
Yield 1.20 1.65 1.96 2.37 2.56 2.05 2.18 2.48 1.84 1.59 2.89 2.36 2.47 4.49
Co. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
TRN EPS 1.40 1.86 1.74 0.10 0.39 0.89 1.58 2.34 4.19 4.87 2.25 1.52 1.43 1.34 1.60
Price 17.60 17.60 13.88 7.88 8.72 13.30 15.03 17.91 27.26 28.01 24.02 27.76 37.46 20.59
P/E 12.57 9.46 7.98 78.80 22.36 14.94 9.51 7.65 6.51 5.75 10.68 18.26 26.20 15.37
Div 0.09 0.12 0.14 0.16 0.16 0.16 0.18 0.22 0.30 0.40 0.44 0.44 0.52 0.52
Yield 0.52 0.68 1.01 2.03 1.83 1.20 1.20 1.23 1.10 1.43 1.83 1.59 1.39 2.53
Co. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
UNP EPS 1.47 1.73 2.26 1.87 2.76 3.36 4.13 4.71 5.75 5.49 5.07 5.79 7.91 9.09 10.35
Price 20.12 23.00 31.41 23.90 31.95 46.33 52.97 62.86 84.00 119.13 78.20 103.68 134.10 138.23
P/E 13.69 13.29 13.90 12.78 11.58 13.79 12.83 13.35 14.61 21.70 15.42 17.91 16.95 15.21
Div 0.30 0.35 0.44 0.54 0.54 0.76 1.20 1.38 1.82 2.20 2.20 2.42 2.92 3.52
Yield 1.49 1.52 1.40 2.26 1.69 1.64 2.27 2.20 2.17 1.85 2.81 2.33 2.18 2.55
Co. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
UPS EPS 3.86 0.36 2.94 2.14 3.48 3.84 0.83 4.57 4.75 5.43 5.75 6.01 7.24 7.46 8.12
Price 74.98 73.19 70.72 55.16 57.37 73.19 73.19 73.73 105.08 111.17 96.23 117.64 119.15 97.53
P/E 19.42 203.31 24.05 25.78 16.49 19.06 88.18 16.13 22.12 20.47 16.74 19.57 16.46 13.07
Div 1.52 1.68 1.80 1.80 1.88 2.08 2.28 2.48 2.68 2.92 3.12 3.32 3.64 3.84
Yield 2.03 2.30 2.55 3.26 3.28 2.84 3.12 3.36 2.55 2.63 3.24 2.82 3.05 3.94
Co. 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
WAB EPS 0.88 1.12 1.34 1.20 1.28 1.86 2.59 3.01 3.62 4.10 3.85 3.43 3.81 4.17 4.85
Price 26.90 20.38 34.44 39.75 40.84 52.89 69.95 87.54 74.27 86.89 71.12 83.02 81.43 70.25
P/E 30.57 18.20 25.70 33.13 31.91 28.44 27.01 29.08 20.52 21.19 18.47 24.20 21.37 16.85
Div 0.02 0.02 0.02 0.02 0.02 0.02 0.06 0.10 0.16 0.24 0.32 0.40 0.48 0.48
Yield 0.07 0.10 0.06 0.05 0.05 0.04 0.09 0.11 0.22 0.28 0.45 0.48 0.59 0.68

Some examples of where I am seeing good valuations:

United Parcel Service at close to a 4% yield with a trend in dividend grow close to 7% per year;

Ryder System at close to a 4% yield with a trend in dividend growth close to 10% per year;

FedEx Corporation with close to a 1.5% dividend yield and too high to be ongoing 50% dividend growth per year.

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