11 Cheap Transportation Stocks To Buy

In this article, we discuss 11 cheap transportation stocks to invest in.

Previously, we reported that the International Air Transport Association (IATA) is optimistic about the global airline industry. IATA also predicted that airlines will achieve a combined net profit of $4.7 billion in 2023, marking the first positive season since the pandemic took over in 2020. IATA’s data shows that passenger levels will return to pre-pandemic levels in 2024, reaching approximately 5.2 billion passengers. In 2022, the airline industry suffered losses of $6.9 billion, which was lower than the priorly forecasted $9.7 billion loss in June. IATA’s chief economist, Marie Owens Thomsen, described the industry’s financial results as “phenomenal.” Additionally, shipping rates, which were high during the challenges posed by the COVID-19 pandemic, have now declined, leading some experts to label it a “freight recession.” This situation has put the shipping freight sector at a disadvantage during annual contract negotiations, but it benefits retailers and other customers by providing lower transportation costs.

The ongoing freight slowdown is evident in data and activity as of April 2023. A survey conducted by CNBC on supply chain factors, such as inventories and warehouse space, indicates a reduction in truck movements in and out of warehouses. This decline, paired with a 40% drop in manufacturing orders, suggests a decrease in freight transportation via both trucks and railways. Data from FreightWaves SONAR, the provider of CNBC Supply Chain Heat Map, further illustrates the weakness in the sector. Year-over-year comparisons of current ocean freight orders departing from worldwide ports and arriving at ports in the United States show a significant decline, reaching half of previous levels. This decrease affects both rail and road transportation, resulting in reduced freight entering the country.

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On a positive note, electric vehicles are making huge waves in the transportation industry. Currently, the diesel-powered trucking industry handles a significant majority of freight, up to 70% in the U.S. alone. According to a recent CNBC report, Swedish EV trucking startup Einride has successfully competed with Tesla and its Semi by attracting prominent corporate clients. Both companies, Einride and Tesla, have secured deals with PepsiCo — Einride in the U.K. and Tesla in California. Although some deals are initially limited in scope, Einride’s founder and CEO, Robert Falck, believes that the economic rationale already exists for a significant portion of the freight industry, potentially up to half, to shift from diesel to electric. Robert Falck observed that in various markets, regardless of short-term fluctuations in diesel prices, electric vehicles are proving to be a more cost-effective option for trucking, although this is influenced by the electricity costs. As the cost of trucking hardware decreases and becomes more widely available, the argument for transitioning to EVs will solidify. In a CNBC interview dated May 11, Falck said: 

“In the $4 trillion freight mobility space, between 40%-50% should be electric driven by the business case today. That means a $2 trillion opportunity already today.” 

Investors looking for gains in the transportation industry can pick up cheap or undervalued transportation stocks like Norfolk Southern Corporation (NYSE:NSC), Canadian National Railway Company (NYSE:CNI), and Union Pacific Corporation (NYSE:UNP). 

Our Methodology 

We selected the following cheap transportation stocks with trailing P/E ratios lower than the industry’s trailing P/E ratio of 23.85 and then sorted the list based on the hedge fund sentiment toward each stock. We have assessed the hedge fund sentiment from Insider Monkey’s database of 943 elite hedge funds tracked as of the end of the first quarter of 2023. The list is arranged in ascending order of the trailing P/E ratio. 

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Cheap Transportation Stocks to Buy

11. American Airlines Group Inc. (NASDAQ:AAL)

Number of Hedge Fund Holders: 36

Trailing P/E Ratio: 6.78

American Airlines Group Inc. (NASDAQ:AAL) operates as a network air carrier. The company was founded in 1926 and is headquartered in Fort Worth, Texas. On April 27, American Airlines Group Inc. (NASDAQ:AAL) reported a Q1 non-GAAP EPS of $0.05, beating market consensus by $0.02. The revenue increased 37.1% year-over-year to $12.2 billion, in line with Wall Street estimates. American Airlines Group Inc. (NASDAQ:AAL) predicts that its adjusted earnings per diluted share for the second quarter of 2023 will range from $1.20 to $1.40, taking into account demand trends and the current fuel price forecast. This estimate is higher than the expected consensus of $1.04. The airline also maintained its previous projection for the full year 2023, with adjusted earnings per diluted share anticipated to fall between $2.50 and $3.50, exceeding the consensus estimate of $2.35.

According to Insider Monkey’s first quarter database, American Airlines Group Inc. (NASDAQ:AAL) was part of 36 hedge fund portfolios, compared to 31 in the prior quarter. D E Shaw is a prominent stakeholder of the company, with 13 million shares worth $192 million. 

In addition to Norfolk Southern Corporation (NYSE:NSC), Canadian National Railway Company (NYSE:CNI), and Union Pacific Corporation (NYSE:UNP), American Airlines Group Inc. (NASDAQ:AAL) is one of the best cheap transportation stocks to buy. 

10. United Airlines Holdings, Inc. (NASDAQ:UAL)

Number of Hedge Fund Holders: 40

Trailing P/E Ratio: 9.39

United Airlines Holdings, Inc. (NASDAQ:UAL) offers air transportation services across North America, Asia, Europe, Africa, the Pacific, the Middle East, and Latin America. The company operates both mainline and regional fleets to transport passengers and cargo. United Airlines Holdings, Inc. (NASDAQ:UAL) is one of the best cheap transportation stocks to buy. The company reported a Q1 non-GAAP EPS of -$0.63, topping Wall Street estimates by $0.10. The revenue increased 51% year-over-year to $11.43 billion, falling in line with market consensus. United Airlines Holdings, Inc. (NASDAQ:UAL) also reiterated a full-year adjusted diluted EPS target of $10 to $12. 

According to Insider Monkey’s first quarter database, 40 hedge funds were long United Airlines Holdings, Inc. (NASDAQ:UAL), compared to 35 funds in the prior quarter. Thomas E. Claugus’ GMT Capital is a prominent stakeholder of the company, with a position worth $98 million. 

9. Delta Air Lines, Inc. (NYSE:DAL)

Number of Hedge Fund Holders: 56

Trailing P/E Ratio: 10.04

Delta Air Lines, Inc. (NYSE:DAL) is involved in the scheduled air transportation services for both passengers and cargo, operating within the United States and globally. The company is divided into two segments – Airline and Refinery. It is one of the best cheap transportation stocks to buy. On July 13, Delta Air Lines, Inc. (NYSE:DAL) reported a Q2 non-GAAP EPS of $2.68 and a revenue of $15.58 billion, outperforming Wall Street estimates by $0.29 and $120 million, respectively. The company anticipates that its earnings per share (EPS) for the third quarter will fall within the range of $2.20 to $2.50, exceeding the consensus estimate of $2.05. Furthermore, for the full year 2023, the company forecasts its EPS to be in the range of $6 to $7, compared to the consensus estimate of $6.19.

According to Insider Monkey’s first quarter database, 56 hedge funds were bullish on Delta Air Lines, Inc. (NYSE:DAL), compared to 51 funds in the prior quarter. Ken Griffin’s Citadel Investment Group is a prominent stakeholder of the company, with 5.5 million shares worth $193.3 million. 

Here is what Miller Value Partners specifically said about Delta Air Lines, Inc. (NYSE:DAL) in its Q3 2022 investor letter:

“Delta Air Lines, Inc. (NYSE:DAL) ($29.42) is a high-quality airline (yes, there really is such a thing!).  It didn’t issue any equity in the pandemic. It focuses on delivering a superb customer experience and has brand loyalty (including a stable revenue stream from partner American Express, growing at 20%/ year). Maybe the best evidence: it’s managed to outperform the S&P 500 over the past decade despite a horrible pandemic ending point (+13.2% vs. 11.7%1 ). It trades for 4x 2024 earnings! If it eventually trades at Southwest’s historical valuation, it implies this stock should double as well.”

8. Knight-Swift Transportation Holdings Inc. (NYSE:KNX)

Number of Hedge Fund Holders: 32

Trailing P/E Ratio: 13.11

Knight-Swift Transportation Holdings Inc. (NYSE:KNX) offers freight transportation services within the United States and Mexico. The company is divided into four segments – Truckload, Less-than-truckload (LTL), Logistics, and Intermodal. Knight-Swift Transportation Holdings Inc. (NYSE:KNX) is one of the best cheap transportation stocks to invest in. On April 20, the company reported a Q1 non-GAAP EPS of $0.73, falling short of Wall Street estimates by $0.08. On the other hand, the revenue of $1.64 billion exceeded market consensus by $30 million. 

According to Insider Monkey’s first quarter database, 32 hedge funds were bullish on Knight-Swift Transportation Holdings Inc. (NYSE:KNX), compared to 34 funds in the prior quarter. Ben Jacobs’ Anomaly Capital Management is the largest stakeholder of the company, with 1.8 million shares worth $105.3 million. 

7. CSX Corporation (NASDAQ:CSX)

Number of Hedge Fund Holders: 61

Trailing P/E Ratio: 16.28

CSX Corporation (NASDAQ:CSX) specializes in providing rail-based freight transportation services. The company’s offerings include rail services, transportation of intermodal containers and trailers, rail-to-truck transfers, and bulk commodity operations. It is one of the best cheap transportation stocks to invest in. On July 12, CSX Corporation (NASDAQ:CSX) declared a quarterly dividend of $0.11 per share, in line with previous. The dividend is payable on September 15, to shareholders of record on August 31. 

According to Insider Monkey’s first quarter database, 61 hedge funds were bullish on CSX Corporation (NASDAQ:CSX), compared to 66 funds in the prior quarter. Eric W. Mandelblatt’s Soroban Capital Partners is the largest stakeholder of the company, with 52.5 million shares worth $1.5 billion. 

Here is what ClearBridge Investments Global Infrastructure Value Strategy has to say about CSX Corporation (NYSE:CSX) in its Q4 2021 investor letter:

“On a regional basis, the U.S. and Canada were the top contributors to quarterly performance, of which U.S. rail operator CSX was among the lead performers. CSX is one of five leading North American rail companies, with over 21,000 miles of rail, covering 23 states and 40+ ports. CSX is engaged in the transportation of rail freight in the Southeast, East, and Midwest via interchange with other rail carriers, to and from the rest of the U.S. and Canada. CSX performed well during the quarter after the company beat market expectations on its third-quarter results. The beats were largely driven by strong pricing, which could be hitting record highs, and healthy commodity/coal volume driven by the current energy crisis.”

6. FedEx Corporation (NYSE:FDX)

Number of Hedge Fund Holders: 55

Trailing P/E Ratio: 16.47

FedEx Corporation (NYSE:FDX) is a multinational company that offers transportation, e-commerce, and business services worldwide. Its FedEx Express segment provides express transportation, small-package ground delivery, freight transportation services, and technology solutions for e-commerce transportation. On June 20, FedEx Corporation (NYSE:FDX) reported a Q4 non-GAAP EPS of $4.94, beating market estimates by $0.07. However, the revenue of $21.9 billion fell short of Wall Street consensus by $760 million. During fiscal 2023, the company bought back more than 9 million shares, which represents approximately 4% of the shares that were outstanding at the beginning of the year. As of May 31, 2023, there is still $2.6 billion available under the current share repurchase authorization. 

According to Insider Monkey’s first quarter database, 55 hedge funds were bullish on FedEx Corporation (NYSE:FDX), compared to 48 funds in the prior quarter. Ken Griffin’s Citadel Investment Group is the biggest stakeholder of the company, with 2 million shares worth $467.2 million. 

Like Norfolk Southern Corporation (NYSE:NSC), Canadian National Railway Company (NYSE:CNI), and Union Pacific Corporation (NYSE:UNP), FedEx Corporation (NYSE:FDX) is one of the top cheap transportation stocks to watch. 

Artisan Value Fund made the following comment about FedEx Corporation (NYSE:FDX) in its Q1 2023 investor letter:

“After bottoming in September 2022 at less than 8X our estimate of normalized earnings, shares of FedEx Corporation (NYSE:FDX), a global shipping and logistics firm, have rallied strongly over the past six months. The demand environment remains challenging, particularly in the Express segment due to lower volumes in Asia and Europe. A key question remains how much the demand slowdown is idiosyncratic due to the post-pandemic reopening of the international economy and therefore less likely to repeat and how much is due to a cyclical slowdown. Due to the substantial pessimism already priced into shares, it hasn’t taken much for shares to rise soundly. Better-than-expected operating results and progress on cost-cutting initiatives, including additional headcount reductions, to offset cost pressures were well-received. While operating results can be choppy, FedEx’s longer term business economics are highly favorable given the global shipping industry’s consolidated structure and massive barriers to entry that afford operators with pricing power to counter cost inflation and earn respectable returns on capital over the business cycle.”

5. Norfolk Southern Corporation (NYSE:NSC)

Number of Hedge Fund Holders: 51

Trailing P/E Ratio: 17.96

Norfolk Southern Corporation (NYSE:NSC) is primarily engaged in rail transportation services in the United States. The company transports a wide range of goods, including agriculture and forest products, chemicals, metals, construction materials, automotive products, and coal. It is one of the cheap transportation stocks to buy. 

On May 22, Citi analyst Christian Wetherbee upgraded Norfolk Southern Corporation (NYSE:NSC) to Buy from Neutral. The analyst believes that the transportation sector in the US will experience a positive turning point, despite the presently low sentiment and valuations. Among railway companies, Norfolk Southern Corporation (NYSE:NSC) is considered to have the most potential for growth due to anticipated service improvements and a gradual reduction of concerns related to the train derailment in East Palestine, Ohio, which occurred earlier in 2023.

According to Insider Monkey’s first quarter database, 51 hedge funds were bullish on Norfolk Southern Corporation (NYSE:NSC), compared to 43 funds in the prior quarter. Ken Griffin’s Citadel Investment Group is the largest stakeholder of the company, with 1.65 million shares worth approximately $352 million. 

The London Company Large Cap Strategy made the following comment about Norfolk Southern Corporation (NYSE:NSC) in its first quarter 2023 investor letter:

“Norfolk Southern Corporation (NYSE:NSC) – NSC was a significant underperformer this quarter reflecting weaker than expected quarterly earnings and news of a train derailment in Ohio. Fortunately, there were no fatalities related to the derailment, but there was environmental damage. Historically, the financial impact from train derailments have been relatively small and NSC’s insurance coverage could help cushion the blow. We believe NSC will emerge from this relatively unscathed, but will have to reinforce some of their network due to changes made from precision scheduled railroading efforts.”

4. Union Pacific Corporation (NYSE:UNP)

Number of Hedge Fund Holders: 85

Trailing P/E Ratio: 18.56

Union Pacific Corporation (NYSE:UNP) provides transportation services for a wide range of goods, including grains, fertilizers, food products, coal, petroleum, industrial chemicals, forest products, metals, automobiles, and intermodal containers. It is one of the top cheap transportation stocks to watch. On April 20, Union Pacific Corporation (NYSE:UNP) reported a GAAP EPS of $2.67, beating market consensus by $0.09. The revenue of $6.06 billion also outperformed Wall Street estimates by $19.81 million. 

According to Insider Monkey’s first quarter data, 85 hedge funds were bullish on Union Pacific Corporation (NYSE:UNP), compared to 83 funds in the prior quarter. Eric W. Mandelblatt’s Soroban Capital Partners is the leading position holder in the company, with 8.26 million shares worth $1.6 billion. 

Matrix Asset Advisors made the following comment about Union Pacific Corporation (NYSE:UNP) in its Q1 2023 investor letter:

“During the quarter we added a new position in Union Pacific Corporation (NYSE:UNP). Union Pacific (UNP) is the 2nd largest railroad network in the United States just behind Burlington Northern Santa Fe. The firm operates in the Western, Midwestern, and Southern portions of the United States. 90% of UNP sales come from the US and 10% from Mexico. Over the past decade, railroads gained market share from the trucking industry because it costs 10-40% less to ship via rails than trucks. The company has a long history of consistent operating growth and profitability. The shares fell from a high of $278 in May of 2022 after the firm experienced operating challenges due to a slower macro environment and higher expenses.”

3. Canadian National Railway Company (NYSE:CNI)

Number of Hedge Fund Holders: 39

Trailing P/E Ratio: 19.50

Canadian National Railway Company (NYSE:CNI) primarily offers rail transportation services. The company provides a variety of rail services, intermodal services, and trucking services, including temperature controlled cargo, customs brokerage, and logistic parks. The company serves automotive, coal, fertilizers, forest products, grain, petroleum, and consumer goods industries across Canada and the United States. Canadian National Railway Company (NYSE:CNI) is one of the best cheap transportation stocks to invest in. 

On May 9, Canadian National Railway Company (NYSE:CNI) disclosed a public debt issuance consisting of C$550 million 4.15% notes due 2030, C$400 million 4.40% notes due 2033, and C$800 million 4.70% notes due 2053. The offering concluded on May 10, 2023. The funds raised will be utilized for general corporate expenses, including potential activities like redeeming and refinancing existing debts, share buybacks, acquisitions, and exploring other business opportunities.

According to Insider Monkey’s first quarter database, 39 hedge funds were bullish on Canadian National Railway Company (NYSE:CNI), compared to 41 funds in the earlier quarter. Bill & Melinda Gates Foundation Trust is the largest stakeholder of the company, with 54.8 million shares worth $6.4 billion. 

2. J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT)

Number of Hedge Fund Holders: 33

Trailing P/E Ratio: 20.79

J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) offers surface transportation, delivery, and logistic services within North America. The company is divided into five segments – Intermodal, Dedicated Contract Services, Integrated Capacity Solutions, Final Mile Services, and Truckload. According to Goldman Sachs, J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) stock has not performed as well as other companies in the light transportation sector this year. While the company’s shares have risen by 8% in 2023, Goldman analysts believe that “asset light names” like JBHT will likely outperform later in the cycle. Goldman Sachs set a price target of $202 for J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) and maintained a Buy rating on the stock on July 18. 

According to Insider Monkey’s first quarter database, 33 hedge funds were long J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT), compared to 30 funds in the prior quarter. Henry Ellenbogen’s Durable Capital Partners is the largest stakeholder of the company, with 2 million shares worth $367 million. 

Wedgewood SMID Cap Strategy made the following comment about J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) in its Q1 2023 investor letter:

“As we continue to familiarize our clients with our SMID portfolio’s holdings, we would like to discuss our significant exposure to the U.S. Transportation industry. We currently have three transportation holdings and have been substantially overweight the industry in comparison to the Russell 2500 index for several years. While these undoubtedly are cyclical business models, we see many long-term tailwinds for the domestic Transportation industry, which will provide attractive growth levels and will allow these companies to improve their returns on investment over time.

J.B. Hunt Transport Services, Inc. (NASDAQ:JBHT) is the country’s largest independent provider of intermodal transportation services, with smaller businesses in trucking and logistics. Intermodal transportation refers to freight deliveries that require the use of more than one “mode” of transportation, most often including some combination of ocean, railroad, and truck between source and destination. J.B. Hunt generally provides the rail portion of these intermodal loads.

J.B. Hunt benefited from the exacerbated shortage in Truckload capacity in both their intermodal business—where they could directly substitute railroad service for people who weren’t able to find TL capacity—and in their smaller, but rapidly growing Dedicated TL division, where the company takes over all or a portion of a shipping customer’s trucking fleet. While customers were paying significantly higher prices and still struggling to find any trucking capacity, they found it very attractive to contract for a dedicated, outsourced fleet with J.B. Hunt.”

1. ZTO Express (Cayman) Inc. (NYSE:ZTO)

Number of Hedge Fund Holders: 23

Trailing P/E Ratio: 21.19

ZTO Express (Cayman) Inc. (NYSE:ZTO) specializes in providing express delivery and value-added logistics services. The company’s services include freight forwarding and delivery solutions for both e-commerce and traditional merchants. On April 25, Goldman Sachs upgraded ZTO Express (Cayman) Inc. (NYSE:ZTO) from Neutral to Buy. Analyst Ronald Keung anticipates significant potential for the transport logistics stock, with more than a 50% upside, as competition in the industry eases. He predicts that the top two express players, including ZTO Express (Cayman) Inc. (NYSE:ZTO), will continue to gain market share due to their strong positioning in a competitive environment where service quality and growth are now the primary focus. It is one of the best cheap transportation stocks to watch. 

According to Insider Monkey’s first quarter database, ZTO Express (Cayman) Inc. (NYSE:ZTO) was part of 23 hedge fund portfolios, compared to 21 in the prior quarter. Kerr Neilson’s Platinum Asset Management is the largest stakeholder of the company, with a position worth $461 million.

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Disclosure: None. 11 Cheap Transportation Stocks To Buy is originally published on Insider Monkey.