Here's Why Investors Should Retain Canadian Pacific KC Stock

Investors interested in Transportation stocks should always be looking to find the best-performing companies in the group. Has United Airlines (UAL) been one of those stocks this year? A quick glance at the company's year-to-date performance in comparison to the rest of the Transportation sector should help us answer this question.

United Airlines is a member of the Transportation sector. This group includes 135 individual stocks and currently holds a Zacks Sector Rank of #10. The Zacks Sector Rank considers 16 different groups, measuring the average Zacks Rank of the individual stocks within the sector to gauge the strength of each group.

The Zacks Rank is a proven system that emphasizes earnings estimates and estimate revisions, highlighting a variety of stocks that are displaying the right characteristics to beat the market over the next one to three months. United Airlines is currently sporting a Zacks Rank of #2 (Buy).

The Zacks Consensus Estimate for UAL's full-year earnings has moved 6.2% higher within the past quarter. This signals that analyst sentiment is improving and the stock's earnings outlook is more positive.

Based on the most recent data, UAL has returned 117.6% so far this year. In comparison, Transportation companies have returned an average of 4.8%. As we can see, United Airlines is performing better than its sector in the calendar year.

One other Transportation stock that has outperformed the sector so far this year is Westinghouse Air Brake Technologies (WAB). The stock is up 56.7% year-to-date.

The consensus estimate for Westinghouse Air Brake Technologies' current year EPS has increased 2% over the past three months. The stock currently has a Zacks Rank #1 (Strong Buy).

Looking more specifically, United Airlines belongs to the Transportation - Airline industry, which includes 31 individual stocks and currently sits at #14 in the Zacks Industry Rank. Stocks in this group have gained about 35.4% so far this year, so UAL is performing better this group in terms of year-to-date returns.

Westinghouse Air Brake Technologies, however, belongs to the Transportation - Equipment and Leasing industry. Currently, this 9-stock industry is ranked #18. The industry has moved +47.3% so far this year.

Investors with an interest in Transportation stocks should continue to track United Airlines and Westinghouse Air Brake Technologies. These stocks will be looking to continue their solid performance.

Zacks Investment Research

Wabtec Corporation (WAB) is strengthening its operations with strategic acquisitions. To this end, Wabtec announced the acquisitions of Fanox and Kompozitum. Wabtec is purchasing the two companies for a $110 million cash transaction, financed through cash on hand and a revolving credit facility.

The two companies will join Wabtec’s Transit business (which recently reported third-quarter 2024 net sales of $733 million, up 9.6% year over year due to strong aftermarket sales. The segmental adjusted operating margin increased to 12.8% from 12.5% in the third quarter of 2023).

Pascal Schweitzer, president at Wabtec Transit, stated, “We are excited about bringing the capabilities of Fanox and Kompozitum to our Transit Business. These acquisitions align with our strategy by bringing in technologies that are complementary to our product portfolio, positioning the business for accelerated, profitable revenue growth. It also enhances Wabtec’s mission to provide our customers with next-generation solutions that improve efficiency, performance, and reliability.”

How Will Wabtec Benefit?

The inclusion of Fanox and Kompozitum is expected to be immediately accretive to WAB’s earnings, excluding transaction costs. Additionally, they are likely to enhance WAB’s potential, product portfolio and customer base.

The buyout of Fanox should boost Wabtec’s existing capabilities in the production of relays for on-board train operations and other industrial applications. This is expected to increase customer base and recurring revenues.

The purchase of Kompozitum is likely to strengthen Wabtec’s pantograph portfolio and open new oppurtunities for its carbon and graphite solutions.

WAB’s Zacks Rank & Price Performance

Wabtec currently carries a Zacks Rank #2 (Buy).

WAB shares have gained 57% so far this year, outperforming its industry and the S&P 500, of which the company is a key member.

YTD Price Comparison

Norfolk Southern’s NSC proactive cost-cutting initiatives are boosting operational efficiency. However, NSC is grappling with economic uncertainties and lackluster liquidity, adversely impacting the company’s operations.

Factors Favoring NSC

Norfolk Southern's strong commitment to safety bodes well for the company. While the FRA personal injury rate has increased, the company has made significant strides in reducing serious injuries and total accidents, with declines of 40% and 20%, respectively. This reflects NSC’s effective focus on mitigating more severe incidents and improving overall safety outcomes.

With safety as its core value, NSC focuses on service performance as its NorthStar. The company has optimized train schedules and reduced handling times, leading to a 13% year-over-year increase in car velocity, driven by a 9% boost in train speed and reduced terminal dwell time. These productivity gains are also accelerating cost reductions, boosting Norfolk Southern’s operational efficiency.

NSC's robust cost-cutting initiatives are driving significant value across the business. In the third quarter of 2024, the company reduced more than 130 crew starts per day, cutting costs by 8%, including a 20% reduction in overtime. This has improved productivity, particularly in locomotive utilization, with an 18% boost in productivity and a strategic reduction in the fleet size.

The company’s new intermodal reservation system enhances terminal visibility, while its precision energy management program has achieved record fuel savings. In the September-end quarter of 2024, operating expenses fell by 34.3% year over year due to reduced fuel costs, which dropped 25.3% year over year. These efforts focus on efficiency, with more cost-saving initiatives in the pipeline.

The company’s price trend reveals that its shares have surged 31% over the past year, surpassing the industry’s 12.2% growth.

American Airlines AAL continues to benefit from strong performance across key revenue segments. Due to the tailwinds, AAL shares have performed impressively on the bourse. If you have not taken advantage of its share price appreciation yet, it’s time to do so.

Let’s delve deeper.

Factors Favoring AAL Stock

Robust Price Performance: The company’s price trend reveals that its shares have surged 23.8% quater-to-date, surpassing the industry’s 6.9% rise.

Landstar System, Inc. (LSTR) is currently mired in multiple headwinds, which, we believe, have made it an unimpressive investment option.

Let’s delve deeper.

Southward Earnings Estimate Revision:The Zacks Consensus Estimate for third-quarter 2024 earnings has been revised 15.6% downward over the past 90 days. For 2024, the consensus mark for earnings has moved 4.4% south in the same time frame. The bearish alterations in estimate revisions underscore a notable decline in brokers' confidence in the stock.

Weak Zacks Rank and Style Score:Landstar currently carries a Zacks Rank #4 (Sell). The company’s current Value Score of C shows its unattractiveness.

Unimpressive Price Performance:LSTR has plunged 1% so far this year compared with the industry’s gain of 14.1%.

Six-Month Price Comparison

GE Aerospace GE has entered into a maintenance, repair and overhaul (MRO) offload agreement with United Aerospace Maintenance Company (“UAMCO”) in Cyprus to focus on quick turnaround services for CFM LEAP engines.

Based in Larnaca, Cyprus, UAMCO recently received EASA approval for quick-turn maintenance on LEAP-1A engines for Airbus A320neo aircraft and LEAP-1B engines for Boeing 737 MAX aircraft. The company is collaborating with GE Aerospace On-Wing Support to deliver on-wing and near-wing retrofits for the LEAP-1A engine's new reverse bleed system. It has two teams available globally for these installations.

The CFM LEAP engine offers 15% better fuel efficiency and reduced carbon emissions compared with the CFM56, with operators saving up to 20% on fuel costs. With more than 3,500 LEAP-powered aircraft in service, the engine has saved more than 35 million tons of CO2 and set a record for the fastest ramp-up in engine flight hours, exceeding 60 million in just eight years.

This collaboration will help GE Aerospace meet its MRO obligations to CFM within an open ecosystem that includes internal capacity from GE and Safran, and external providers competing for LEAP engine work.

GE’s Zacks Rank

GE currently carries a Zacks Rank #2 (Buy). In the year-to-date period, the company’s shares have gained 59.8% compared with the industry’s 54.1% growth.

GE Aerospace has been witnessing strength in its businesses, driven by robust demand for commercial engines, propulsion and additive technologies. Rising U.S. & international defense budgets, geopolitical tensions, positive airline and airframer dynamics and robust demand for commercial air travel augur well for the company.

Other Stocks to Consider

Other top-ranked companies are discussed below.

Southwest Airlines Co. LUV currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Southwest Airlines delivered a trailing four-quarter average earnings surprise of 111.6%. In the past 60 days, the Zacks Consensus Estimate for LUV's 2024 earnings has increased 222.6%.

SkyWest, Inc. SKYW presently sports a Zacks Rank of 1. The company delivered a trailing four-quarter average earnings surprise of 79.12%.

In the past 60 days, the Zacks Consensus Estimate for SKYW’s 2024 earnings has increased 4.1%.

American Airlines Group Inc. AAL currently carries a Zacks Rank of 2. AAL delivered a trailing four-quarter average earnings surprise of 124.37%.

In the past 60 days, the consensus estimate for American Airlines’ fiscal 2025 earnings has increased 35.5%.

Zacks Investment Research