When the clock strikes midnight on October 1, 2024, dockworkers at dozens of ports throughout the United States are likely to go on strike. As of this writing, a strike of some length is a near certainty. And the impact on the United States economy is tough to overstate.
First, the ports involved account for over 50% of U.S. container imports and would come at a cost of $4.5 billion per day to the U.S. economy.
Second, there's inflation. Analysts forecast a strike that lasts for weeks or months could reignite inflation. It could also cause manufacturers to lay off workers at a time when the Fed's rate cuts are designed to keep unemployment from getting out of hand.
This may create difficulty for consumers, but it's also an opportunity for nimble investors. In this special presentation, we're looking at seven logistics stocks that may look particularly attractive if the dockworkers' strike lasts for any extended period.
Quick Links
- United Parcel Service
- FedEx Corp.
- RXO, Inc.
- GXO Logistics
- Union Pacific
- KnightSwift Transportation
- Lineage
#1 - United Parcel Service (NYSE:UPS)
United Parcel Service Inc. (NYSE: UPS) is one of the first names that companies are looking at as alternatives to the ports. Even though UPS sold its freight business in 2021, the company is still among the leaders in international airfreight. And although the higher cost of air freight may not be a solution for every company, many companies, especially those with perishable items, may have no other alternative.
UPS stock is down 14.6% in 2024, which has turned the stock’s performance negative over the last 12 months. However, the stock has gained 4.4% in the last month with no news to speak of. One plausible theory is that with the stock trading around 40% lower than its all-time high set in 2022, it was simply oversold.
But with no news in particular, institutional investors may have been front running the likelihood of a strike. That buying activity is likely to accelerate, which makes UPS a stock to watch ahead of its earnings in late October.
About United Parcel Service
United Parcel Service, Inc, a package delivery company, provides transportation and delivery, distribution, contract logistics, ocean freight, airfreight, customs brokerage, and insurance services. It operates through two segments, U.S. Domestic Package and International Package. The U.S. Domestic Package segment offers time-definite delivery of express letters, documents, small packages, and palletized freight through air and ground services in the United States.
Read More - Current Price
- $132.07
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 13 Buy Ratings, 8 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $151.52 (14.7% Upside)
#2 - FedEx Corp. (NYSE:FDX)
FedEx Corp. (NYSE: FDX) delivered what could only be described as a disastrous earnings report on September 19. Not only did the company miss on the top and bottom lines, it issued weaker-than-expected guidance for the coming quarter. The news is not surprising. The consumer is under pressure, and that’s likely to be reflected in fewer packages being delivered this holiday season.
FDX stock tumbled approximately 15% after the report but has made up about half of that loss to close out September. Some investors may be buying the dip on a stock that has an attractive dividend — $5.52 per share annually. However, it’s also likely that investors see FedEx as a winner in air freight.
That could be driving analyst sentiment as well. In the week following the company’s earnings report, many analysts have lowered their price target on FDX stock. However, it’s worth noting that in many cases the new price target is significantly above the consensus target of $314.74, which is itself 14% higher than the stock’s current price.
About FedEx
FedEx Corporation provides transportation, e-commerce, and business services in the United States and internationally. It operates through FedEx Express, FedEx Ground, FedEx Freight, and FedEx Services segments. The FedEx Express segment offers express transportation, small-package ground delivery, and freight transportation services; and time-critical transportation services.
Read More - Current Price
- $288.03
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 17 Buy Ratings, 8 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $316.04 (9.7% Upside)
#3 - RXO, Inc. (NYSE:RXO)
RXO, Inc. (NYSE: RXO) provides fleet management services. Essentially, it brokers freight transportation, matching companies that need items shipped. It stands to gain as companies will be looking for the best price to move their goods around the country. Analysts note this will be particularly true if the strike is short as companies, particularly small businesses, will look to expedite shipping for the holidays.
RXO’s competitive advantage, for now, is its use of artificial intelligence (AI) to optimize its operations. But this is more than just a play on the port strike. Investors have already been looking at RXO as a company to watch as industrial activity picks up due to the start of the Federal Reserve’s rate cut cycle.
RXO has only been trading publicly since October 2022. The stock is up 19% in 2024 but has pulled back about 2.5% after reporting the second consecutive quarter of revenue that was lower year-over-year.
About RXO
RXO, Inc provides full truckload freight transportation brokering services. It also offers brokered services for managed transportation, last mile, and freight forwarding. The company was incorporated in 2022 and is based in Charlotte, North Carolina.
- Current Price
- $27.54
- Consensus Rating
- Hold
- Ratings Breakdown
- 3 Buy Ratings, 12 Hold Ratings, 2 Sell Ratings.
- Consensus Price Target
- $26.47 (3.9% Downside)
#4 - GXO Logistics (NYSE:GXO)
GXO Logistics Inc. (NYSE: GXO) provides supply chain management solutions that are customized to every customer’s complexities and industries.
GXO has only been publicly traded since 2021. Not surprisingly, the company has been posting consistently solid revenue and earnings as the supply chain disruptions caused by a global pandemic has made companies rethink their supply chain.
However, as the economy has slowed in 2023 and 2024, GXO stock is down nearly 40% including a 13.7% decline in 2024. But the port strike is likely to renew interest in the company’s products and services, particularly with companies that may have put off that expense as they drew down inventories but will need it to remain competitive.
Analysts agree, with a consensus price target of $67.27 on the stock, which provides a 27% upside.
About GXO Logistics
GXO Logistics, Inc, together with its subsidiaries, provides logistics services worldwide. The company provides warehousing and distribution, order fulfilment, e-commerce, reverse logistics, and other supply chain services. As of December 31, 2023, it operated in approximately 974 facilities. The company serves various customers in the e-commerce, omnichannel retail, technology and consumer electronics, food and beverage, industrial and manufacturing, consumer packaged goods, and others.
Read More - Current Price
- $58.50
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 9 Buy Ratings, 2 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $67.00 (14.5% Upside)
#5 - Union Pacific (NYSE:UNP)
Railroads will play a key role in managing any supply chain disruptions and Union Pacific Corp. (NYSE: UNP) is an obvious choice. The Nebraska-based company owns over 32,000 miles of track covering 23 states. However, a key reason that Union Pacific stands to benefit from a port strike is the intermodal nature of its business. That simply means that the company offers its customers multiple options for moving their cargo.
This was evident in 2020 and 2021 as the company’s trucking business wasn’t sufficient to handle the volume of business coming into the ports. This is a different problem, but the company is well positioned to manage the problem through rail and trucking solutions.
UNP stock is down about 0.5% in 2024 and has been rangebound for approximately two years. Nevertheless, analysts maintain a Moderate Buy rating on Union Pacific, and several analysts have price targets that are significantly above the consensus price of $258.11.
About Union Pacific
Union Pacific Corporation, through its subsidiary, Union Pacific Railroad Company, operates in the railroad business in the United States. The company offers transportation services for grain and grain products, fertilizers, food and refrigerated products, and coal and renewables to grain processors, animal feeders, ethanol producers, renewable biofuel producers, and other agricultural users; and construction products, industrial chemicals, plastics, forest products, specialized products, metals and ores, petroleum, liquid petroleum gases, soda ash, and sand, as well as finished automobiles, automotive parts, and merchandise in intermodal containers.
Read More - Current Price
- $233.56
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 12 Buy Ratings, 8 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $259.80 (11.2% Upside)
#6 - KnightSwift Transportation (NYSE:KNX)
Knight-Swift Transportation Holdings Inc. (NYSE: KNX) provides freight transportation services in the United States and Mexico. Even without the port strike, the company is expected to be among the winners as interest rate cuts spur economic activity.
If the port strike is fairly short-lived, as some analysts expect, then Knight-Swift may be an attractive turnaround play as retailers look to expedite shipments to make up for lost time. And if the strike lasts longer than expected, the full-service logistics company can provide its customers with warehousing and port services.
KNX stock is down 6.2% in 2024, but it’s up 8.2% in the three months ending September 30. That has the stock trading at around the middle of its 52-week range, where it’s been for the past several years. Analysts have a consensus price target of $57 on KNX stock, but those targets may move higher after the company reports earnings on October 17.
About Knight-Swift Transportation
Knight-Swift Transportation Holdings Inc, together with its subsidiaries, provides freight transportation services in the United States and Mexico. The company operates through four segments: Truckload, Less-than-truckload (LTL), Logistics, and Intermodal. The Truckload segment provides transportation services, which include irregular route and dedicated, refrigerated, expedited, flatbed, and cross-border operations.
Read More - Current Price
- $56.00
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 9 Buy Ratings, 7 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- $56.38 (0.7% Upside)
#7 - Lineage (NASDAQ:LINE)
Lineage Inc. (NASDAQ: LINE) is the world's largest global temperature-controlled warehouse real estate investment trust (REIT). The company operates a network of more than 480 strategically located facilities that feature advanced automation that boosts its margin.
Lineage’s customer base includes many of the world’s largest food and beverage companies in the United States, Europe, and Asia-Pacific. It’s reasonable to expect the company will be able to charge premium pricing if demand increases due to a port strike.
LINE stock may be a new name to many investors; it has only been publicly traded since July 2024. As of this writing, it’s down sharply from its IPO price, which can make it risky for investors looking to avoid buying a stock that has further to fall.
But analysts are bullish on the stock giving it a $93.63 price target that is 18% higher than its closing price on September 30, and it recently announced its first dividend which will pay shareholders 38 cents per share.
About Lineage
Lineage, Inc is the world's largest global temperature-controlled warehouse REIT with a network of over 480 strategically located facilities totaling over 84.1 million square feet and 3.0 billion cubic feet of capacity across countries in North America, Europe, and Asia-Pacific. Coupling end-to-end supply chain solutions and technology, Lineage partners with some of the world's largest food and beverage producers, retailers, and distributors to help increase distribution efficiency, advance sustainability, minimize supply chain waste, and, most importantly, feed the world.
- Current Price
- $63.86
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 12 Buy Ratings, 5 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $90.75 (42.1% Upside)
We should all hope for a swift resolution to the port strike. But hope is not a strategy, which is why investors should look for ways to profit from the disruptions that are likely to ensue.
Many buy-and-hold investors may be put off by the idea of basing their investment strategy on the headlines of the day. But if you have some capital on the sideline, you may want to consider investing in one or more of the stocks on this list, particularly if they've been on your watchlist.
Events like a port strike can have ripple effects that last for several quarters. However, if you wait for the results to show up in a company's earnings report, you'll have likely missed the biggest gains.
MarketBeat makes it easy for you to keep informed of the news that affects the stocks in your portfolio. And even if a stock isn't on your watchlist, MarketBeat.com has all the tools that you need to make sound investment decisions.
More Investing Slideshows:
