Average traffic volumes have been on an upward trend over the past two years and will reach new highs this year. Price action in early 2025 will be bullish, confirming the trend with a strong signal, including crossovers of critical moving averages. While this set isn’t technically a gold crossover, it confirms the trend with a strong signal.
The 9-day EMA is moving above the 150-day and 30-day, showing that short-, medium- and long-term market participants are in tune with ample room for the market to move higher. There is some risk of resistance at 16600, but it is unlikely that this market will hold without a significant change in outlook.
The freight growth forecast for 2025 is moderate, but includes moderate increases in volumes and prices sufficient to support stable return on equity prospects. Driven by international demand and rising consumer activity, growth in the upper to mid-single digits is expected for air, cargo and rail carriers.
The latest consumer spending data shows retail sales outpacing inflation in December, a sign of rising demand that is expected to continue into 2025.
Long term forecasts are also good. The trucking industry bottomed out in 2024 and is expected to grow and accelerate over the next four to five years.
There are catalysts that could lead to better-than-expected performance for transportation companies across the board. President Trump has issued numerous executive orders to support his agenda to promote economic growth. The orders include industrial deregulation, tax breaks and tariffs to stimulate domestic production and job creation. Since the labor market was already in good shape, tailwinds are likely to develop and can be seen in the data as early as the second quarter.
Growth and improved profitability in 2025 for the three largest companies in the transport sector
Union Pacific is one of the three largest companies in the transportation industry by market capitalization. New York Stock Exchange: UNPUber New York Stock Exchange: UBERand United Parcel Service New York Stock Exchange: UPS. All three countries are expected to grow in 2025, maintaining 2024 rates or accelerating from last year. Wider margins are also forecast. Uber will likely lead the pack with net income growth of 22%, but all companies are projected to see double-digit revenue growth. Uber has seen improved profitability and increased cash flow. It began actively repurchasing shares in 2024 and is likely to maintain a healthy pace in 2025.
Analyst trends are driving up transportation company stock prices. All have a Moderate Buy rating, with low to double-digit upside as indicated by consensus. Critical takeaways from the data include increased coverage, warming sentiment and the expectation of new multi-year or all-time highs in 2025. Analysts are lukewarm on UNP, but still see potential for at least 10% growth this year.
Uber doesn’t pay a dividend, but UNP and UPS do, and the yield is attractive. UPS is a high-yield company yielding over 5% per annum, with shares trading near mid-January levels. Its payouts are solidly safe, but will likely grow at a slow pace due to its higher-than-desired payout ratio.
The company will pay out about 85% of its earnings in 2024, a worrying signal tempered by growth prospects. The payout ratio will fall in 2025 and continue to decline for the rest of the decade. Union Pacific is also a high-yield relative to the S&P 500, paying about twice as much as the broad market. Its payout is more reliable: it’s only 50% of earnings and is likely to increase at a high single-digit rate this year.
Delta Air Lines is a well-positioned transport company
Delta Air Lines today
Delta Air Lines
- 52 week range
- $36.98
▼
$68.99
- Dividend yield
- 0.88%
- P/E ratio
- 12.83
- Target price
- $78.22
Delta Air Lines New York Stock Exchange: DAL is the seventh largest transportation company by market capitalization and one of the best companies positioned to gain strength in 2025. Its business is in the consumer and business travel and cargo industries; all three are strong. Travel demand and revenue will reach record levels in 2024, driven by industry-leading loyalty and premium services, with new highs expected in 2025.
The company’s management expects strong travel demand in 2025 to be focused on high-margin premium services. One of the biggest takeaways for 2024 is improved cash flow, which will allow it to reduce debt and resume dividend distributions. Dividends are still below 2019 levels, but strong growth rates are expected in 2025 and 2026.
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