Morgan Stanley has upgraded its 2026 outlook for the freight transportation industry to "attractive." Analysts led by Ravi Shanker believe that, despite lingering uncertainties, the sector's risk-reward profile is the strongest since 2020. They note that demand has remained stagnant at historically low levels since mid-2024, when the destocking cycle clearly ended, awaiting specific catalysts such as interest rate cuts, U.S. elections, and tariff policy clarity—without showing sustained recovery.
The report provides detailed insights across key segments: - **Trucking**: In a bear-case scenario, 2026 would resemble 2025, but a bull case could deliver over 50% upside. Autonomous trucking is expected to reach a pivotal stage, with companies scaling pilot fleets ahead of potential 2027 commercialization. - **Railroads**: Mergers and acquisitions, particularly involving Union Pacific (UNP.US) and Norfolk Southern (NSC.US), will dominate narratives. However, if fundamentals lag behind trucking during an upcycle, M&A momentum may fade. Low single-digit volume and pricing growth are projected, with preference for Canadian railroads over U.S. peers. - **Logistics/3PL**: 2026 could be transformative for brokers as AI-driven differentiation faces real-world tests. Key questions include sustainability of tech advantages, market-share retention against asset-heavy carriers, and operational leverage in asset-light models. - **Parcel Delivery**: A critical year as cost-restructuring programs conclude, revealing normalized EPS levels. Structural shifts in e-commerce—rural delivery and returns—may redefine competition.
Stock recommendations: - Upgrades: Canadian Pacific Kansas City (CP.US) and Old Dominion Freight Line (ODFL.US) to "overweight." - Top picks: Knight-Swift Transportation (KNX.US) retains its No. 1 spot, followed by GXO Logistics (GXO.US) and Ryder (R.US). Canadian National Railway (CNI.US) and CPKC round out the top five.
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