Dow Jones Transportation Average Takes a Nosedive

Although the Dow Jones transportation average was at a record high in May, it has already begun its downturn and, according to industry analysts, is bracing for an economic slowdown.

Indeed, the industry faces a number of obstacles, including the rising cost of fuel and basic materials and even the success of services like GoTo Meetings, which limit the need to travel.

What's more, we're still crawling our way out of a recession, meaning not as many people have the time and money to travel leisurely or professionally, which creates a lower demand for services.

The transportation market has never been a guaranteed winner -- a quick look at the industry's performance shows its volatility -- yet in the midst of the recession's healing process, "some market strategists see the downturn as an ominous sign, as transportation companies -- railroads, truckers, airlines, ocean shippers -- are widely considered a leading economic indicator."

We decided to take a closer look at the Dow Jones 20 transportation companies and their performance over the past month as well as the state of their trailing 12 month (TTM) operating margin.

The TTM operating margin is calculated as Operating Income/ Net sales; it measures what proportion of the company's revenue is left over after paying all daily expenses including wages and repairs (before taxes and interest). It is an especially key data point for this industry, considering the volatility in demand, fuel, and raw material prices. The higher the margin, the more prepared the company is to take on these costs.

Below are the names with the highest TTM operating margin, starting with the three that outperformed their competitors on the basis of TTM gross, operating, and pre-tax margins. (Click here to access free, interactive tools to analyze these ideas.)

Top names on the Dow Jones Transportation index in order of TTM operating margin:

1. CSX (NYSE: CSX  ) : Railroads Industry. Market cap of $9.12B. The stock performed at a 1.35% loss in the previous month, compared to a gain of 39.15% over the previous year. This stock is an industry leader, outperforming its competitors. TTM Gross margin at 38.38% vs. industry average of 36.38%. TTM operating margin at 29.59% vs. industry average at 25.82%. Pre-tax margin at 24.49% vs. industry average of 22.48%.

2. Union Pacific (NYSE: UNP  ) : Railroads Industry. Market cap of $49.06B. The stock performed at a 1.53% loss in the previous month, compared to a gain of 33.28% over the previous year. This stock is an industry leader, outperforming its competitors. TTM Gross margin at 37.99% vs. industry average of 36.86%. TTM operating margin at 29.33% vs. industry average at 26.69%. Pre-tax margin at 26.36% vs. industry average of 22.96%.

3. Norfolk Southern (NYSE: NSC  ) : Railroads Industry. Market cap of $25.07B. The stock performed at a 1.58% loss in the previous month, compared to a gain of 23.02% over the previous year. This stock is an industry leader, outperforming its competitors. TTM Gross margin at 36.42% vs. industry average of 36.38%. TTM operating margin at 28.08% vs. industry average at 25.82%. Pre-tax margin at 24.51% vs. industry average of 22.48%.

4. Kansas City Southern (NYSE: KSU  ) : Railroads Industry. Market cap of $5.87B. The stock performed at a 4.36% loss in the previous month, compared to a gain of 30.21% over the previous year. TTM Operating margin at 24.25%.

5. United Parcel Service (NYSE: UPS  ) : Air Delivery & Freight Services Industry. Market cap of $68.22B. The stock performed at a 6.32% loss in the previous month, compared to a gain of 13.82% over the previous year. TTM Operating margin at 12.42%.

6. Expeditors International of Washington (Nasdaq: EXPD  ) : Air Delivery & Freight Services Industry. Market cap of $10.10B. The stock performed at a 9.38% loss in the previous month, compared to a gain of 24.16% over the previous year. TTM Operating margin at 9.54%.

7. JB Hunt Transport Services (Nasdaq: JBHT  ) : Trucking Industry. Market cap of $5.41B. The stock performed at a 3.19% loss in the previous month, compared to a gain of 30.12% over the previous year. TTM Operating margin at 9.37%.

8. JetBlue Airways (Nasdaq: BLU  ) : Regional Airlines Industry. Market cap of $1.76B. The stock performed at a 4.96% loss in the previous month, compared to a loss of 8.76% over the previous year. TTM Operating margin at 8.59%. The stock is a short squeeze candidate, with a short float at 18.13% (equivalent to 8.77 days of average volume). The stock has had a couple of great days, gaining 5.88% over the last week.

9. Southwest Airlines (NYSE: LUV  ) : Regional Airlines Industry. Market cap of $8.66B. The stock performed at a 10.77% loss in the previous month, compared to a loss of 10.62% over the previous year. TTM Operating margin at 8.33%.

10. GATX (NYSE: GMT  ) :Rental & Leasing Services Industry. Market cap of $1.69B. The stock performed at a 5.99% loss in the previous month, compared to a gain of 29.35% over the previous year. TTM Operating margin at 8.04%. The stock is a short squeeze candidate, with a short float at 11.09% (equivalent to 13.7 days of average volume).

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the stocks mentioned above. Analyst ratings sourced from Zacks Investment Research.


Disclosure: Kapitall's Becca Lipman does not own any of the shares mentioned above.

The Motley Fool owns shares of United Parcel Service. Motley Fool newsletter services have recommended buying shares of Southwest Airlines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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