By Paul R. La Monica
Transportation stocks have chugged along this year, despite some brief blips related to spiking oil prices. But now that there is a cease-fire between the U.S. and Iran, the cost of crude has slid -- and transportation stocks have roared back.
The Dow Jones Transportation Average is up 28% this year. But transport stocks may still be attractive given that this group of 20 stocks, which includes airlines Delta Air Lines and United Airlines, shippers UPS and FedEx, and railroads CSX and Union Pacific, for example, remains 10% below the high it hit in early April.
Valuations are reasonable. According to FactSet, the iShares Transportation Average exchange-traded fund is trading at 22 times earnings estimates for this year. That's roughly in line with the broader market, but it's a discount to its five-year average forward price/earnings ratio of 24. What's more, this transportation ETF has typically traded at a nearly 10% premium to the S&P 500.
Analysts at Fundstrat argue that the iShares Transportation ETF is a good bet given the recent developments in Iran.
"Transportation remains one of the cleaner cyclical setups. Any material advance in cease-fire negotiations, along with a decline in oil prices, would benefit this group directly," they wrote in a recent report.
As for individual stocks, FedEx, which will report earnings on June 23 and just completed the spinoff of FedEx Freight, still looks like a bargain at 17 times profit forecasts for this year. Analysts are predicting that earnings per share will be up more than 20% in the current quarter.
BofA Securities analyst Ken Hoexter said in a report in early June that he expects FedEx to benefit from lower overhead costs now that it's separated the freight unit. And UBS analyst Thomas Wadewitz said in late May that "the potential for margin improvement is a key lever" for both FedEx and FedEx Freight.
FedEx rival UPS is even more attractive, trading at 15 times earnings estimates. United and Delta, which both recently hit record highs, trade at below-market multiples too. So do Southwest Airlines, Ryder, and Union Pacific. And ride-sharing/delivery giant Uber Technologies, which was added to the Dow Jones Transportation Average in early 2024, looks like a bargain as well. It trades at 22.2 times this year's earnings estimates.
The strength of the transports may also be a great macroeconomic sign and a positive for the broader market. Analysts at Turning Point Research pointed out in a recent report that over the past six months, the S&P 500 Transportation Industry Group has hit new 252-day highs 19 times. (This is an important number in technical analysis because there are 252 trading days in a calendar year.)
"Given transportation's central role in the movement of goods and people, strength in the group often indicates underlying economic momentum," the Turning Point analysts said, adding that this is the strongest performance for transportation stocks since early 2021.
Along those lines, there's also the widely watched Dow Theory, which argues that it's a good sign if the transportation stocks are moving in tandem with the broader Dow Jones Industrial Average. The Dow 30 just hit a record high and have gained more than 8% this year.
The broader market strength seems to be confirmation that the bull market for the transportation stocks still has a clear road ahead.
Corrections & Amplifications: FedEx will report earnings on June 23. An earlier version of this article incorrectly gave the date as June 21.
Write to Paul R. La Monica at paul.lamonica@barrons.com
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(END) Dow Jones Newswires
June 19, 2026 21:31 ET (01:31 GMT)
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