ZACKS·2026-01-05 16:26Industry Overview - The Zacks Transportation-Services industry is facing challenges due to weak freight rates, high inflation, and supply-chain disruptions, compounded by tariff uncertainties and geopolitical tensions [1][2][4]. - Companies in this industry provide transport, logistics, leasing, and maintenance services, with a direct correlation to economic health [3]. Current Trends - Freight demand remains weak, with the Cass Freight Shipments Index declining by 7.6% year over year in November, marking a continuous decline for nine months [4]. - Rising cost pressures, including labor shortages and increased maintenance costs, are eroding profit margins, with ongoing inflation potentially narrowing margins further [5]. - The U.S. Federal Reserve's recent interest rate cuts may provide some relief by lowering borrowing costs and potentially boosting economic growth [6]. Industry Performance - The Zacks Transportation-Services industry ranks 166 out of 243 Zacks industries, placing it in the bottom 32% [7][8]. - The industry's earnings outlook is negative, with a 28.3% year-over-year decrease in aggregate earnings estimates for 2026 [9]. - Over the past year, the industry has underperformed the S&P 500, gaining only 3.3% compared to the S&P 500's 16.9% increase [12]. Valuation Metrics - The industry is currently trading at a forward price-to-sales ratio of 1.46X, significantly lower than the S&P 500's 5.6X and slightly above the sector's 1.31X [15]. Notable Companies - Expeditors International of Washington (EXPD): A leading third-party logistics provider with a Zacks Rank of 1 (Strong Buy). Despite weak volumes, cost-cutting measures are positively impacting earnings, which have beaten estimates by an average of 13.9% over the last four quarters [18][19]. - ZTO Express (Cayman) (ZTO): A major express delivery player in China, also holding a Zacks Rank of 1. The company has a long-term earnings growth expectation of 3.1% [22][23]. - C.H. Robinson Worldwide (CHRW): An asset-light logistics player with a Zacks Rank of 3 (Hold). The company has consistently surpassed earnings estimates, with an average beat of 10.4% over the last four quarters [26].