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 United Airlines Holdings, Inc. (NASDAQ:UAL) 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 large commercial jetliner taking off from an airport runway.
United Airlines Holdings, Inc. (NASDAQ:UAL)
Number of Hedge Fund Holders: 56
United Airlines Holdings, Inc. (NASDAQ:UAL) is an Illinois-based airline. It is one of the world’s largest airlines with an extensive domestic and international flight network. It serves nearly 213 destinations in the US and over 130 internationally.
The airline has also made significant investments in improving passenger experiences and offers various cabin classes, including its Polaris business class and Premium Plus service, alongside an evolving fleet that focuses on modern amenities. With a strong infrastructure, extensive network, and commitment to innovation, it remains one of the key competitors in the global airline industry.
During the second quarter, United Airlines (NASDAQ:UAL) reported a non-GAAP EPS of $4.14, which surpassed estimates by $0.21. Revenue reached $14.99 billion, which marked a 5.7% increase year-over-year and beat expectations by $20 million. The company’s capacity also rose by 8.3% compared to the previous year, a sign of its ability to scale operations effectively in response to growing customer demand.
In the second quarter, the company reported a historic milestone by transporting 44.4 million passengers, the highest for this timeframe in the company’s history. Additionally, it set a daily record by serving 565,000 travelers in one day. On top of that, international capacity was 35% greater than that of its nearest U.S. rival, which shows its dominant market presence.
United Airlines’ (NASDAQ:UAL) stock was held by 56 hedge funds in Q2 with total positions worth $1.468 billion, bringing the company to the 5th spot on our list of the best transportation stocks to invest in. PAR Capital Management was the company’s top shareholder with 4.559 million shares worth $221.843 million.
Overall UAL ranks 5th on our list of the best transportation stocks to invest in now. While we acknowledge the potential of UAL 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.
