Industry 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].

Core Insights - The broader equity markets experienced a mini recovery, ending a four-day losing streak, driven by cooling inflation and strong performances from key blue-chip stocks [1][2] - The November consumer price index report indicated an annual inflation increase of 2.7%, lower than the expected 3.1%, while core consumer price inflation was at 2.6%, compared to a forecast of 3% [1] Investment Opportunities - Investors are encouraged to focus on "cash cow" stocks with high return on equity (ROE) to maximize returns, as high ROE indicates effective reinvestment of cash [2][3] - TE Connectivity plc (TEL), ZTO Express (Cayman) Inc. (ZTO), Pilgrim's Pride Corporation (PPC), Assurant, Inc. (AIZ), and Host Hotels & Resorts, Inc. (HST) are highlighted as stocks with high ROE and favorable efficiency scores [2][7] Financial Metrics - ROE is defined as Net Income divided by Shareholders' Equity, serving as a key indicator of a company's profitability and financial health [3] - A higher ROE signifies better management efficiency in generating profits without new equity capital [4] Screening Parameters - Stocks were screened based on criteria including cash flow greater than $1 billion, ROE greater than the industry average, price/cash flow ratio lower than the industry average, return on assets (ROA) greater than the industry average, and a 5-year EPS historical growth greater than the industry average [5][6][7] - Zacks Rank of 1 (Strong Buy) or 2 (Buy) was also considered, indicating stocks likely to outperform the market [7] Company Profiles - **TE Connectivity**: A global technology company focused on connectivity and sensor solutions, with a long-term earnings growth expectation of 12.3% and a trailing four-quarter earnings surprise of 6.5% [8][9] - **ZTO Express**: A leading express delivery service in China, with a Zacks Rank of 1 and a long-term earnings growth expectation of 3.1% [10][11] - **Pilgrim's Pride**: Engaged in the production and distribution of chicken products, with a trailing four-quarter earnings surprise of 10.4% and a Zacks Rank of 2 [11][12] - **Assurant**: A provider of risk management solutions, with a trailing four-quarter earnings surprise of 22.7% and a Zacks Rank of 2 [12][13] - **Host Hotels**: A leading lodging REIT with a trailing four-quarter earnings surprise of 11% and a Zacks Rank of 2 [14][15]

Core Insights - ZTO Express Cayman (ZTO) is experiencing strong operational efficiency and liquidity, leading to impressive share performance, suggesting it is a good time for investment [1] Factors Favoring ZTO Stock - The Zacks Consensus Estimate for earnings per share (EPS) has been revised upward by 6.5% for the current year and by 6.6% for 2026, indicating broker confidence in the stock [2] - ZTO shares have surged 12.1% over the past 90 days, outperforming the Zacks Transportation - Services industry's growth of 2.9% [3][8] - ZTO currently holds a Zacks Rank 1 (Strong Buy), reflecting strong market sentiment [5] Growth Factors - Parcel volume growth is a significant tailwind for ZTO, with a 9.8% year-over-year increase in Q3 2024 and express delivery revenues rising 11.6% year-over-year, contributing to overall growth [6][8] - The company projects its 2025 parcel volume to be between 38.2 billion and 38.7 billion, indicating a year-over-year growth of 12.3-13.8% [6] Financial Health - ZTO's current ratio improved from 0.96 in Q3 2024 to 1.38 in Q3 2025, indicating sufficient funds to meet short-term obligations [7]

Market Overview - The equity markets experienced significant volatility due to strong quarterly performances from some blue-chip tech firms being overshadowed by concerns over the rising valuations of AI companies [1] - Experts predict that the growth of AI firms may not justify the substantial investments, potentially leading to a market correction [1] - The U.S. government shutdown has reached a record 38 days, contributing to investor uncertainty and increased market volatility [1] Economic Conditions - The U.S. economy showed signs of weakness with 153,000 job cuts in October, the highest for that month in 22 years, raising concerns about labor market conditions [2] - Investors are adopting a cautious "wait-and-see" approach, focusing on "cash cow" stocks that provide higher returns [2] Investment Metrics - Return on Equity (ROE) is highlighted as a crucial metric for assessing a company's financial health and efficiency in generating profits [3][4] - A high ROE indicates effective reinvestment of cash at a high rate of return, distinguishing profitable companies from less efficient ones [3][4] Stock Screening Criteria - Stocks are screened based on parameters such as Cash Flow greater than $1 billion and ROE exceeding the industry average [5] - Additional criteria include Price/Cash Flow lower than the industry average and Return on Assets (ROA) greater than the industry average [6] - A 5-Year EPS Historical Growth greater than the industry average is also considered to ensure continued earnings momentum [6] High-ROE Stocks - TE Connectivity, ZTO Express, Corning, Banco Bilbao, and VICI Properties are identified as high-ROE stocks that offer resilient investment options [7] - TE Connectivity has a long-term earnings growth expectation of 10.7% and a trailing four-quarter earnings surprise of 6.5% on average, with a Zacks Rank of 2 [9] - ZTO Express has a long-term earnings growth expectation of 1.7% and also carries a Zacks Rank of 2 [11] - Corning has a long-term earnings growth expectation of 18.2% and a trailing four-quarter earnings surprise of 4.1% on average, with a Zacks Rank of 1 [12] - Banco Bilbao has a long-term earnings growth expectation of 12% and a trailing four-quarter earnings surprise of 5.7% on average, with a Zacks Rank of 2 [13] - VICI Properties has a long-term earnings growth expectation of 4.2% and a trailing four-quarter earnings surprise of 0.4% on average, with a Zacks Rank of 2 [15]

Group 1 - FedEx Corporation reported solid growth in adjusted operating income and margin expansion for FY25, achieving a two-year $4 billion DRIVE target and adhering to a $2.2 billion structural cost reduction commitment [2][3] - The company reduced capacity on the Asia-to-Americas lane by more than 35% in May 2025 to effectively match demand [2] - FedEx issued €500 million in 3.5% Notes due in 2032 and €350 million in 4.125% Notes due in 2037, which are expected to positively impact its financial structure and operations [3] Group 2 - The company appointed Vishal Talwar as Chief Digital and Information Officer and President of FedEx Dataworks, effective August 15 [3] - FedEx has gained the trust of 67 hedge funds, indicating strong institutional interest that attracts stable income-seeking investors in the freight sector [4] - The stock value of FedEx is projected to increase by approximately 18.57% over the next year [4] Group 3 - FedEx specializes in transportation, e-commerce, and business services, and is recognized as a global leader in the express delivery industry with its "hub and spoke" logistics network [5]

Core Insights - ZTO Express is set to report its second-quarter 2025 results on August 19, with earnings estimated at $1.55 per share, reflecting a 7.2% decline from 2024 actuals, while revenues are projected to reach $6.83 billion, indicating an 11.1% increase from 2024 [1] Group 1: Financial Performance - The company's bottom-line performance is expected to be negatively impacted by high operating expenses, despite strong parcel volumes driving top-line growth [2] - ZTO Express reported first-quarter 2025 earnings of 37 cents per share, matching the previous year's quarter, but total revenues of $1.50 billion fell short of the Zacks Consensus Estimate of $1.67 billion [4] Group 2: Market Conditions - The ongoing trade war between the United States and China is anticipated to affect the upcoming quarter's results [3][10] - Parcel volumes are forecasted to increase by 20-24% in 2025, which is expected to enhance ZTO's top-line growth, although revenues from freight forwarding services may decline due to weak demand [10] Group 3: Competitive Landscape - ZTO currently holds a Zacks Rank of 4 (Sell), indicating a less favorable outlook compared to other companies in the sector [5]