As the economy staggers back from coronavirus, a split is appearing in the world of transportation. Railroads are thriving and air travel is struggling.
Consider these two points from yesterday:
- The Association of American Railroads reported that train traffic increased by 9 percent last week. It was the biggest gain since March 2018.
- The Transportation Security Administration (TSA) said air traveler screenings fell to the lowest level since July. Overall traffic is down about 70 percent in the last year.
Those reports closely match quarterly results from railroads and air-travel stocks. Union Pacific (UNP), Norfolk Southern (NSC), CSX (CSX) and Kansas City Southern (KSU) mostly beat estimates or issued strong guidance. Meanwhile, Delta Airlines (DAL) and United Airlines (UAL) issued bleak outlooks and Boeing (BA) missed consensus by a mile.
The divergence between railroads and air travel isn’t much of a surprise. But investors may not realize how widely the implications go. Simply put, the world of travel is splitting into a new set of “winners” and “losers.”
Travelling in the Age of Coronavirus
These are the apparent “winners,” or beneficiaries of the new reality in transportation:
- Railroads stand to gain from the economic rebound. In addition to the big operators like UNP, CSX, NSC and KSU, suppliers are also benefiting. Those include Trinity Industries (TRN), Greenbrier Cos. (GBX), Wabtec (WAB) and FreightCar America (RAIL).
- Recreational vehicles have enjoyed stronger demand as Americans look to travel without flying. Those include Polaris (PII), Thor Industries (THO), Harley-Davidson (HOG) and Winnebago (WGO).
These companies may face risks from the new circumstances:
- Traditional airlines like DAL, UAL, American Airlines (AAL), Southwest Airlines (LUV) and JetBlue (JBLU).
- Aircraft makers and suppliers like BA, Spirit Aerosystems (SPR) and Textron (TXT).
In conclusion, some big differences are appearing in stocks related to transportation and travel as the U.S. tries to recover from the coronavirus pandemic. These may be longer-lasting trends for investors to know in coming months and years.
