We recently compiled a list of the 7 Best Transportation Stocks To Invest In Now. In this article, we are going to take a look at where Norfolk Southern Corporation (NYSE:NSC) stands against the other transportation stocks.
At the September meeting, the Fed decided to lower its target range for the federal funds rate by 0.5%, bringing it down to 4.75%-5%. The decision is based on progress toward reducing inflation, which remains somewhat elevated but is moving closer to the Fed’s 2% target.
This could be a good sign for the transportation industry as lower rates reduce borrowing costs which could help the industry to access cheaper financing. Moreover, lower rates usually encourage consumer spending and could strengthen the supply chain as lower rates improve manufacturing and trade activities.
Fed Chair Jerome Powell noted that the U.S. economy remains strong, with inflation easing significantly from its peak to an estimated 2.2% as of August, while the core PCE rose 2.7%.
Powell emphasized that while the labor market has cooled, with slower job gains and a higher unemployment rate, it is no longer a source of inflationary pressure. The Fed expects inflation to reach 2% in the coming years. It also noted that wage growth has moderated.
Transport Industry Growth Drivers: Manufacturing Output and Consumer Demand
According to a report by Atradius, global transportation and logistics are expected to grow steadily in the coming years, due to rising manufacturing output and consumer demand. The sector is projected to expand by 3.8% in 2024 and 4.0% in 2025, supported by a European recovery, which will strengthen the industry. Decreased oil and fuel prices should relieve some cost pressures, while the impact of the Red Sea crisis will keep freight rates high but likely moderate with the addition of new ships.
The U.S. sector is expected to expand by 2.7% in 2024, supported by strong consumer demand and infrastructure investments, while China’s logistics industry is forecasted to grow by 4.8% due to rising imports, exports, and e-commerce demand. India’s transportation sector is set for significant growth at 12%, fueled by increased middle-class spending. Japan’s industry will see 5.9% growth, driven by recovering industrial production.
On the other hand, in the Eurozone, transportation growth will be slower, at 0.6% in 2024, before accelerating to 2.7% in 2025, while Germany faces a 1.3% decline in 2024. The UK’s transport sector remains challenged by weak business sentiment and labor shortages.
Our Methodology
For this article, we used transportation ETFs to identify nearly 40 stocks and then narrowed our list to the 7 stocks most widely held by institutional investors. The best transportation stocks to invest in are listed in ascending order of their hedge fund sentiment, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A bird’s eye view of a long freight train rumbling along the tracks.
Norfolk Southern Corporation (NYSE:NSC)
Number of Hedge Fund Holders: 50
Norfolk Southern Corporation (NYSE:NSC) operates a strong rail transportation network in the U.S., moving a range of materials including agricultural goods, chemicals, petroleum products, and automotive-related items.
The company’s extensive rail system spans over 19,500 route miles across 22 states and the District of Columbia, and connects 800 industrial sites, 175 warehouses, and 43 ports. The infrastructure supports the transportation of more than 7 million carloads each year, which shows the scale and efficiency of its operations.
In 2023, the company completed significant infrastructure improvements amounting to $1 billion, which will improve operational efficiency and service quality. Additionally, in September, the company announced a $200 million investment to expand capacity along the 3B Corridor in Alabama, a crucial route linking northern and central Alabama to the Port of Mobile. This initiative is expected to generate immediate benefits starting in 2025.
Norfolk Southern’s (NYSE:NSC) recent leadership change was discussed by BofA analyst Ken Hoexter on September 12. Following the termination of CEO Alan Shaw, Mark George was appointed as the new President & CEO. The analyst is confident that this transition will be seamless, with COO John Orr continuing to drive operational improvements while George ensures consistency in leadership.
Hoexter highlighted that the company has reaffirmed its full-year 2024 targets. The firm made note of Norfolk Southern’s (NYSE:NSC) combination of ongoing productivity enhancements, a focus on volume growth, and the ability to increase yields, which position it for substantial earnings growth.
Given these factors, the analyst maintained a Buy rating on the stock, with a price target of $259. With a solid operational foundation and strategic investments underway, the company is well-positioned to advance in the evolving transportation landscape.
Norfolk Southern (NYSE:NSC) was part of 50 hedge funds’ portfolios in the second quarter with a total stake value of $1.118 billion. Ancora Advisors is the biggest shareholder in the company and has a position worth $242.81 million as of Q2. It takes the 7th spot on our list of the best transportation stocks to invest in now.
Overall NSC ranks 7th on our list of the best transportation stocks to invest in now. While we acknowledge the potential of NSC as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is promising and trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
