The shipping industry anticipates a strong peak season and a recovery in freight demand in the second quarter of this year, which should drive growth. Moreover, increased focus on geographical expansion and the introduction of automation is expected to boost accuracy and efficiency in the shipping industry.
Hence, it might be wise to buy robust shipping stocks, AerCap Holdings N.V. (AER) and Radiant Logistics, Inc. (RLGT), which are trading at discounts.
Despite initial negative sentiments, the Container Price Sentiment Index (xCPSI), a sentiment analysis tool by Container xChange that concurrently surveys supply chain professionals on their short-term price expectations, has steadily become more positive, reaching an all-time high in early April, indicating growing confidence in the shipping industry for the upcoming quarter.
Additionally, in the past decade, automation has been a key trend reshaping the freight market with advanced technologies like artificial intelligence (AI) and machine learning, leading to greater efficiency and cost savings on fuel for carriers.
Moreover, e-commerce offers attractive growth prospects for the shipping industry. The global e-commerce market is predicted to grow at a CAGR of 12% from 2020 to 2023.
Furthermore, air freight offers advantages such as time-saving and high security and also requires less packaging than other transportation methods due to weight limits. As a result, consolidated air freight services are also gaining popularity. IMARC Group expects the global air freight market to exhibit a CAGR of 5.7% until 2028.
In addition, key players in the shipping industry are focusing on geographical expansions and mergers and acquisitions to expand their customer base.
Take a look at the stocks mentioned above:
AerCap Holdings N.V. (AER)
Headquartered in Dublin, Ireland, AER engages in the lease, financing, sale, and management of commercial flight equipment in China, Hong Kong, Macau, the United States, Ireland, and internationally.
On March 31, AER announced it had signed lease agreements for two 737-800BCF (Boeing Converted Freighters) with a newly launched cargo airline, PT Rusky Aero Indonesia, operating as Raindo United Services (Raindo).
AER’s forward EV/EBITDA of 9.75x is 5.6% lower than the industry average of 10.33. Its forward P/B multiple of 0.72 is 69.3% lower than the industry average of 2.35.
AER’s trailing-12-month EBITDA margin of 48.06% is 262.1% higher than the 13.27% industry average. Its trailing-12-month gross profit margin of 53.53% is 80% higher than the 29.75% industry average.
During the fiscal fourth quarter that ended December 31, 2022, AER’s total revenue and other income increased 26.8% year-over-year to $1.83 billion. Net income grew 449.9% year-over-year to $497.61 million. Also, its EPS increased 363.6% year-over-year to $2.04.
AER’s revenue is expected to come in at $1.77 billion for the fiscal first quarter that ended March 2023. Its EPS is expected to amount to $1.60 for the same quarter. Additionally, it has topped consensus revenue and EPS estimates in three of the trailing four quarters, which is impressive.
Shares of AER have gained 23.8% over the past nine months to close the last trading session at $54.02.
AER’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Sentiment and a B in Growth. It is ranked #6 out of 16 in the B-rated Air Freight & Shipping Services industry.
Beyond what is stated above, we’ve also rated AER for Value, Stability, Quality, and Momentum. Get all AER ratings here.
Radiant Logistics, Inc. (RLGT)
RLGT is a third-party logistics company that provides technology-enabled global transportation and value-added logistics solutions, primarily in the United States and Canada. It offers domestic, international air, and ocean freight forwarding services; and freight brokerage services, including truckload and intermodal services.
RLGT’s forward EV/EBITDA of 6.08x is 41.1% lower than the industry average of 10.33x. Its forward P/S multiple of 0.26 is 79.9% lower than the industry average of 1.29.
RLGT’s trailing-12-month asset turnover ratio of 2.98x is 272.3% higher than the 0.80x industry average.
RLGT's gross profit increased 3.8% year-over-year to $70.40 million during the fiscal second quarter that ended December 31, 2022, while its net income came in at $4.93 million. Also, the company’s income per share came in at $0.10.
Street expects RLGT’s revenue for the fiscal third quarter ended March 2023 to come in at $262.70 million. Its EPS is expected to come in at $0.16 for the same quarter. Additionally, it has topped consensus revenue estimates in each of the trailing four quarters.
The stock has gained 24.6% year-to-date to close the last trading session at $6.34.
RLGT’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
RLGT has an A grade for Value and a B in Quality. It is ranked #5 in the same industry.
Click here for the additional POWR Ratings for RLGT (Momentum, Growth, Sentiment, and Stability).
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AER shares were trading at $54.76 per share on Wednesday morning, up $0.74 (+1.37%). Year-to-date, AER has declined -6.10%, versus a 6.75% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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