Investing in Transportation Stocks

Moving people and things from place to place is big business, and many different transportation companies can take you and your stuff wherever you want. By investing in the stocks of those companies, you can profit from transportation.

Transportation companies have been in the news of late due to supply chain bottlenecks that have caused a wide range of companies to revise estimates. Ports, railroads, and truckers have been affected. The strong demand has helped pricing power, but labor shortages have led to higher costs and limited the upside for these stocks.

Below, we examine the top transportation stocks and explain how best to invest in them.

What are transportation stocks?

Transportation stocks are those of companies categorized as industrial businesses, which include everything from heavy equipment makers to transportation service providers. The following types of businesses are included in the transportation industry:

• Airlines, which fly passengers.
• Air freight companies, which fly cargo.
• Railroads, which move passengers and freight by train.
• Trucking companies, which haul goods by road.
• Marine shipping companies, which move products by sea.
• Logistics companies, which use a variety of transportation modes to ensure things are moved quickly and efficiently.
• Service providers, such as airport operators, marine ports, and private toll-road companies, which help other companies to provide all modes of transportation.

(Not all companies that move things are treated as transportation stocks. For example, pipeline companies that move crude oil, natural gas, and water are classified as energy or utility stocks.)

How to evaluate top transportation stocks

To assess the merits of transportation companies, keep the following factors in mind.

Fixed and operating costs

Transport companies tend to have high fixed costs, which are the costs that remain the same regardless of the quantity of goods or services sold. The best transportation companies keep their fixed costs under strict control.

A transportation company's operating ratio -- its operating costs as a percentage of revenue -- is also important. Operating costs differ from fixed costs because they vary in direct proportion to the quantity of goods or services sold.

Most transportation companies use a lot of energy, so their financial performance is directly linked to the price of crude oil. Whether the company needs jet fuel for planes, diesel fuel for trucks and trains, or a combination of electricity and natural gas to operate industrial equipment, the best transportation companies prioritize maximizing their fuel efficiency.

Indebtedness

With high fixed costs, transportation companies need a lot of money to buy or create needed equipment. Many choose to finance capital expenditures using long-term debt, but the best transportation companies are careful to keep their debt at manageable levels.

Competitive strength

You can evaluate a company both on a stand-alone basis and in comparison to its competitors. Competition in the transportation sector can be fierce, with many companies fighting to serve the same customers. Using the U.S. airline industry as an example, carriers such as United Airlines (NASDAQ:UAL), Southwest Airlines (NYSE:LUV), Delta Air Lines (NYSE:DAL), and JetBlue (NASDAQ:JBLU) are all competing to take you where you want to go.

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Are transportation stocks right for you?

When the economy is strong, transportation companies tend to perform well because plenty of people and businesses want to travel and ship things. But travel and shipping demand can fall dramatically during tough economic times, so transportation stocks are best suited to investors who are comfortable with cyclicality.

Transportation stocks provide direct portfolio exposure to the state of the economy and have a reputation for signaling whether good times or bad are ahead.

FAQ

Some top-notch transportation stocks in 2025

Among the best-known transportation companies are the following:

• United Parcel Service (NYSE:UPS): An industry leader in package delivery, UPS ships billions of packages and documents every year by land, sea, and air. UPS also maintains a network of stores, customer centers, and drop boxes.
• Union Pacific (NYSE:UNP): This industrial railroad has an extensive network of tracks in the western two-thirds of the U.S., with several different routes between the Mississippi River and the Pacific Ocean. Union Pacific ships everything from coal and chemicals to crops and cars.
• Old Dominion Freight Line (NASDAQ:ODFL): With a massive coverage network, this trucking company serves the continental U.S., Hawaii, and Puerto Rico. Old Dominion specializes in "less-than-truckload" or LTL trucking, which involves hauling loads for more than one customer on one truck. It is a complex part of the business that, when done well, can generate higher margins than other parts of the trucking industry.
• Kirby (NYSE:KEX): This U.S. tank barge operator uses the entire Mississippi River watershed as a conduit for moving goods through the U.S. heartland. Kirby delivers bulk liquids to customers on the west, east, and Gulf of Mexico coasts, as well as Alaska and Hawaii.