Citi Senior Analyst Makes Calls From The Transportation Sector
Christian Wetherbee, a Senior Citi (NYSE: C) Investment Research and Analysis analyst covering airfreight, surface and marine transportation, appeared on CNBC's Squawk Box Monday morning where he highlighted Union Pacific (NYSE: UNP) and FedEx (NYSE: FDX) as good investments. He also discussed his view of the overall economy from the transportation sector and its reactions to the government shutdown.
"Union Pacific continues to be our favorite pick in the railroads space. Very strong barriers to entry there. Good pricing still exists there, and we're getting double-digit earnings growth," said Wetherbee.
Although, he did note that not all of the Union Pacific news has been great, while defending his investing position moving forward.
"With Union Pacific there was a little bit of a change in the mix of traffic that they carry with the decline in coal and grain which are relatively high-revenue, high-margin businesses for them," said Wetherbee.
"I think the rest of the businesses…those bulk commodities were actually doing okay. So the pre-announcement was negative, but it only missed by about 3 percent. So it wasn't really all that negative."
In total, they've seen an increase in volume for railroads in the transportation sector.
"If you look over the course of the third quarter, it was actually somewhat constructive. Yeah, July up about 80 basis points for railcar loads, and then it accelerated to about [2.5] percent growth in August, and then September was the strongest of the three months up almost 3 percent," said Wetherbee.
"So it was actually a better trend as we move through through the quarter."
There's a far different narrative unfolding over at FedEx, however, but it's one that Wetherbee likes.
"FedEx I think is kind of interesting because it's one of the few transport names not at an all-time stock price high. You still have some fairly depressed margins in their express segment, and you have a self-help story that's underway if you get a little bit of tail wind from the economy helping out, I think it could be a very interesting story going forward," said Wetherbee.
As an overall indicator for the economy, Wetherbee said things seem to be getting somewhat better. In terms of rail transports, he's observed an economy moving at a good pace, saying that it "actually seems as good as it's been over the last, call it six or nine months."
He doesn't see the government shutdown having a huge impact on transport rails and thinks that the freights business will continue to operate at a normal rate, although he noted that a long stretch could effect the ports because of issues with customs.
"For the time being, I think we're okay," said Wetherbee.
At the time of this writing, Jason Cunningham had no position with the mentioned entities. Visit Jason on Twitter @JasonCunningham.
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