Despite the aforementioned headwinds, the industry has demonstrated resilience, particularly among companies focused on growth strategies and operational efficiency. Given this backdrop of an improving freight scenario, investors would do well to monitor stocks like United Parcel Service UPS, FedEx FDX and GXO Logistics GXO.
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
Freight Scene on the Mend: A Big Positive : After a prolonged downturn, freight demand appears to be brightening. Highlighting the brightening freight demand scenario, the Cass Freight Shipments Index improved 5.6% month on month in August 2026. This measure has improved month on month in five of the past seven months, which confirms the improving scenario. Moreover, the shipments component of the Cass Freight Index rose 2.1% in August, marking the first year-over-year growth since January 2023, ending a 42-month downturn, the longest on record.
Uptick in AI Investments Support Efficiencies: Increased AI adoption and automation are significantly boosting the efficiency, safety and profitability of transport service providers. By leveraging AI-driven predictive analytics, companies can forecast maintenance needs before vehicle breakdowns occur, drastically reducing costly fleet downtime and extending vehicle lifespans. Automated routing algorithms dynamically adjust delivery paths in real time based on traffic, weather and fuel efficiency, allowing logistics providers to speed up delivery times while cutting fuel expenses. Additionally, AI-powered scheduling and demand forecasting help operators optimize resource allocation, ensuring that vehicles are deployed precisely when and where passenger or cargo demand is highest. Ultimately, these innovations mitigate human error, improve driver safety and enable transport providers to scale their operations smoothly in an increasingly competitive market.
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 #113. This rank places it in the top 46% 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 11.5% over this period compared with the S&P 500’s rise of 15% and the broader sector’s 12.6% 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 9.91X compared with the S&P 500’s 17.76X. It is also lower than the sector’s trailing 12-month EV/EBITDA of 10.91X.
Over the past five years, the industry has traded as high as 13.80X, as low as 7.82X and at the median of 10.43X.
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 each of the past four quarters. The average beat was 12.4%.
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 past four quarters, the average beat being 10.7%. The Zacks Consensus Estimate for 2026 earnings is likely to increase 21.9% year over 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).