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:
2. Union Pacific
3. Norfolk Southern
4. Kansas City Southern
5. United Parcel Service
6. Expeditors International of Washington
7. JB Hunt Transport Services
8. JetBlue Airways
9. Southwest Airlines
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.