We recently compiled a list of the 7 Cheap Transportation Stocks to Buy According to Analysts. In this article, we are going to take a look at where United Airlines Holdings, Inc. (NASDAQ:UAL) stands against the other cheap transportation stocks.
The 33rd Annual Study of Logistics and Transportation Trends was posted on Supply Chain Management Review (SCMR) on September 12. It highlighted the growing challenges facing the logistics and transportation industry as market conditions, regulations, and technological advancements evolve.
The study surveyed over 200 industry professionals, of which 85% had 15+ years of experience and 80% held senior positions. The report provides insight into spending trends, strategies, performance, and regulatory impacts.
The study noted a significant decline in private fleet spending, down to 7.23%, while intermodal transport spending reached a decade-high of 6.5%. Larger shippers (sales over $3 billion) generally align with these trends but spend less on small package and less-than-truckload (LTL) services.
All performance metrics tracked in the study saw declines from 2023, with profitability, return on assets, competitive positioning, and revenue growth all down. Customer satisfaction remained high but showed signs of strain.
Talent shortages were a critical issue, especially in mid-level management and low-wage positions. Companies struggle to offer training due to a lack of time and knowledgeable trainers, with only 39% having formal learning programs. While logistics jobs offer stability and growth opportunities, they are perceived to lag in flexibility and benefits.
Growth Despite Challenges
According to Benchmark International, the global freight and logistics market is projected to grow to $18.69 billion by 2026, with a 4.4% annual growth rate. The logistics segment alone is expected to reach $6.55 trillion by 2027, growing at 4.7% per year. The market includes services like transportation, warehousing, consultation, and packaging across several industries such as manufacturing, agriculture, and construction. Asia-Pacific leads the market share, while North America is expected to grow the fastest by 2027.
Some of the most significant drivers of growth include trade agreements, technological advancements, and globalization. Innovations such as AI, blockchain, and GPS have streamlined logistics operations. The surge in e-commerce and online shopping has also fueled demand for efficient delivery systems, especially “last-mile” services, which represent the costliest part of shipping. The rise of the gig economy, where local couriers fulfill deliveries, has helped reduce these costs.
Sustainability is becoming a focus in logistics, with green initiatives offering fuel savings and appealing to eco-conscious consumers. Furthermore, mergers and acquisitions in the trucking and maritime sectors are expected to increase in 2024, which are driven by lower interest rates and advancements in fleet management technologies.
Our Methodology
For this article, we used transportation ETFs to identify nearly 40 stocks. Next, we narrowed our list to 7 stocks with the lowest PE ratios and highest average analyst price target, as of September 20. The PE ratio of all the stocks in our list is lower than 20.
We also mentioned the hedge fund sentiment around each stock which was taken from Insider Monkey’s database of over 900 elite hedge funds. 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)
Average Analyst Price Target Upside as of September 20: 33.22%
PE Ratio (FWD) as of September 20: 5.41
Number of Hedge Fund Holders: 56
United Airlines Holdings, Inc. (NASDAQ:UAL) plays a vital role in global air transportation, offering extensive services across North America, Asia, Europe, Africa, the Pacific, the Middle East, and Latin America.
With a comprehensive mainline and regional fleet, it not only transports passengers but also moves cargo. Additionally, the airline provides catering, ground handling, flight training, and maintenance services to third-party clients, further diversifying its revenue streams.
In 2023, the company expanded its operational footprint, serving nearly all destinations worldwide, including 213 domestic and 135 international locations. With nearly 4,865 daily departures, the airline transported over 160 million customers throughout the year, which is evidence of its strong market presence and commitment to meet travel demand.
United Airlines (NASDAQ:UAL) has overwhelming Buy ratings from analysts. As of September 20, the average price target of $69.50 has an upside of 33.22% from the current levels. It ranks 3rd on our list of cheap transportation stocks to buy according to analysts.
In the second quarter, CEO Scott Kirby highlighted the company’s success in attracting a diverse customer base, which includes premium travelers, Basic Economy customers, and frequent domestic flyers. He mentioned that the broad appeal, combined with a strong loyalty program and a commitment to customer service, has enabled the airline to achieve margins that rank among the highest in the industry.
In a record-setting quarter, United Airlines (NASDAQ:UAL) carried 44.4 million passengers, making it the highest number of customers transported in the company’s history for that period. The airline also achieved a daily record, accommodating 565,000 passengers in a single day. Operating nearly 2,700 daily flights, it executed the largest schedule in its history for the second quarter, offering the most extensive domestic services in the U.S. and Canada. Its international schedule was 35% larger than that of the next largest U.S. competitor in terms of available seat miles, which further shows the company’s significant market position.
In Q2, 56 hedge funds had investments in United Airlines (NASDAQ:UAL), with positions worth $1.468 billion. PAR Capital Management is the top investor in the company and has a position worth $221.843 million, as of June 30.
Overall UAL ranks 3rd on our list of the cheap transportation stocks to buy according to analysts. 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.
Read Next: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.