2 Air-Freight & Cargo Stocks in Focus Despite Industry Hurdles

Industry Overview - The Zacks Transportation—Air Freight and Cargo industry is facing ongoing supply-chain disruptions, influenced by high inflation, elevated interest rates, and weaker demand leading to reduced package volumes [1][4] - Companies in this industry provide air delivery and freight services, with many offering specialized transportation and logistics solutions [3] Key Trends - Economic uncertainty and tariff concerns are negatively impacting the industry, with inflation causing worries about delayed rate cuts by the Federal Reserve, which could harm economic health [4] - A significant decline in shipping demand, particularly in Asia and Europe, is affecting volumes, with UPS projecting an 8.5% decrease in average daily volumes for 2025 compared to 2024 [5][6] Financial Performance - UPS expects consolidated revenues of $89 billion for 2025, below the Zacks Consensus Estimate of$94.6 billion, and plans to reduce business with its largest customer by 50% [6] - UPS's board raised its quarterly cash dividend to $1.64 per share, with expected dividend payments of$5.5 billion and share repurchases of $1 billion for 2025, indicating strong financial returns for shareholders [7] Market Position - The Zacks Air Freight and Cargo industry currently holds a Zacks Industry Rank of 222, placing it in the bottom 10% of 246 Zacks industries, reflecting a negative earnings outlook [8][10] - The industry has underperformed the S&P 500 and the broader Transportation sector, decreasing by 12.4% over the past year compared to a 6% decline in the sector and an 18.5% gain in the S&P 500 [11] Valuation Metrics - The industry is trading at a trailing 12-month EV/EBITDA of 8.9X, significantly lower than the S&P 500's 17.33X and the sector's 11.07X [13] Notable Companies - FedEx Corporation (FDX) and Air Transport Services Group (ATSG) are highlighted as resilient companies likely to navigate current challenges, with FedEx actively rewarding shareholders through dividends and buybacks [2][16] - ATSG is modernizing and expanding its fleet, expecting to operate 149 aircraft by the end of 2024, and is also engaging in shareholder buybacks [21]