Nevertheless, we believe the industry has enough growth prospects, especially for companies emphasizing expansion initiatives and operational efficiencies. Despite the reopening of economies, consumer appetite for online shopping continues to be robust. Cost-control measures aimed at enhancing profitability are also encouraging. Increased investments in AI are also aiding efficiency. Companies such as United Parcel Service UPS, FedEx FDX, and GXO Logistics GXO are successfully leveraging these favorable dynamics.
About the Industry
The companies belonging to the Zacks Transportation-Air Freight and Cargo industry provide air delivery and freight services. Most players in the space are involved in offering specialized transportation and logistics services. Some participants offer a range of supply-chain solutions, such as freight forwarding, customs brokerage, fulfillment, returns, financial transactions and repairs. The well-being of the companies in this industrial cohort is directly proportional to the health of the economy. Leading industry players, including FedEx, transport millions of packages each day across the globe. Apart from operating a ground fleet of multiple vehicles, some of these companies maintain an air fleet. While some players focus on providing air transportation services for passengers and cargo, others deliver services to entities that outsource air-cargo lifting requirements.
3 Key Trends to Watch in the Transportation-Air Freight & Cargo Industry
Emphasis on Shareholder Returns: As economic activity rebounds from pandemic-era lows, companies are increasingly using their growing cash reserves to reward shareholders through dividends and share buybacks. This reflects both financial resilience and confidence in prospects. Within the Transportation-Air Freight and Cargo space, FedEx raised its quarterly dividend by 5% in 2026.
Cost-Control Measures to Support Profitability: Although inflation has shown some signs of easing, it remains elevated. The industry continues to face cost pressures, including higher expenses for labor, freight and fuel. To counter the softer demand conditions, companies are prioritizing cost reductions while enhancing productivity and operational efficiency. Additionally, companies are investing big time in AI, thereby reducing the cost structure and promoting safety. Cost optimization and automation are helping protect profitability. These efforts have paid off, as evidenced by FedEx’s stronger-than-expected performance in the fourth quarter of fiscal 2026.
E-commerce Continues to Be a Key Driver: While e-commerce growth has moderated from the surge seen during the pandemic due to economic reopening, it remains solid. The convenience of online shopping continues to support demand, alongside ongoing digitalization trends. Strength in e-commerce is expected to remain a crucial growth driver for companies in the industry.
Zacks Industry Rank Indicates Bullish Trends
The Zacks Air Freight and Cargo industry, housed within the broader Zacks Transportation sector, currently carries a Zacks Industry Rank #105. This rank places it in the top 43% of 247 Zacks industries.
The group’s Zacks Industry Rank, the average of the Zacks Rank of all member stocks, indicates sunny near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry’s position in the top 50% of the Zacks-ranked industries is a result of a positive earnings outlook for the constituent companies in aggregate. Before we present a few stocks from the industry that investors can retain in their portfolios, let’s take a look at the industry’s recent stock market performance and the valuation picture.
Industry Lags the S&P 500 and the Sector
The Zacks Air Freight and Cargo industry has underperformed the Zacks S&P 500 composite as well as the broader Transportation sector over the past year.
The industry has gained 16.2% over this period compared with the S&P 500’s rise of 20% and the broader sector’s 22% uptick.
One-Year Price Performance
Industry's Current Valuation
Based on the trailing 12-month enterprise value-to-EBITDA (EV/EBITDA), a commonly used multiple for valuing Transportation-Air Freight and Cargo stocks, the industry is currently trading at 10.71X compared with the S&P 500’s 18.41X. The figure is also lower than the sector’s trailing 12-month EV/EBITDA of 11.85X.
Over the past five years, the industry has traded as high as 13.41X, as low as 7.46X and at the median of 10.08X.
Enterprise Value-to-EBITDA Ratio (TTM)
3 Transportation-Air Freight and Cargo Stocks to Keep a Tab On
The aforementioned stocks presently carry a Zacks Rank #3 (Hold) each.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
UPS: The company is based in Atlanta. We are appreciative of the company's efforts to reward its shareholders through dividends and buybacks. Robust free cash flow generation by UPS is a major positive and leads to an uptick in shareholder-friendly activities.
Cost-cutting efforts are supporting its bottom line. Impressive e-commerce demand and expansion efforts should serve UPS well in the coming year. Its earnings outshone the Zacks Consensus Estimate in three of the last four quarters and missed once, the average beat being 10.6%.
Price and Consensus: UPS
FedEx: The company’s efforts to reward its shareholders even in these uncertain times are praiseworthy. Apart from paying dividends, FDX is active on the buyback front. FedEx's liquidity position is also solid. FDX’s efforts to cut costs are driving its bottom line.
Despite the tariff-induced and geopolitical challenges, it is worth noting that the company has the brand and the network to continue generating steady cash flows in the long run. Dividend stocks like FDX are generally safe bets for creating wealth, as these payouts act as a hedge against economic uncertainty. FedEx's liquidity position is also solid.
Price and Consensus: FDX
GXO Logistics: We are impressed by GXO’s efforts to strengthen its logistics capabilities. Increased e-commerce, automation and outsourcing are serving the company well.
GXO’s earnings surpassed the Zacks Consensus Estimate in each of the last four quarters, the average beat being 10.8%. GXO’s shares have increased 5% over the past year.
Price and Consensus: GXO
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United Parcel Service, Inc. (UPS): Free Stock Analysis Report
FedEx Corporation (FDX): Free Stock Analysis Report
GXO Logistics, Inc. (GXO): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).