Barclay’s recently hosted its 35th annual Barclays Industrial Select Conference, and analyst Brandon Oglenski summarized his takeaways from the airlines and transportation sectors in an investor note. According to Oglenski, investors have reason for optimism in 2018.
Ogleski says he can’t recall an event within the past six years at which management seemed as positive about the industries. Not only are airline and transportation companies reaping the demand rewards of a booming economy, Oglenski said most companies are in the early stages of determining how best to use their beefed-up cash flows following the corporate tax cuts.
Why It's Important
In the airline industry, Oglenski said it’s clear skies ahead for U.S. carriers, especially Delta Air Lines, Inc. DAL and American Airlines Group Inc. AAL. Oglenski said there’s a major disparity between bullish management commentary and negative investor sentiment.
“Despite a recently higher capacity outlook from United, we sense a large competitive response from other carriers is unlikely, driving out continued favorable outlook in the sector, specifically for stocks such as AAL and DAL,” Oglenski wrote.
In the railroad industry, Oglenski said improving balance sheets, volume growth and forecasts for pricing gains have created the perfect storm for investors. Oglenski specifically mentioned CSX Corporation CSX, Union Pacific Corporation UNP and Canadian Pacific Railway Limited (USA) CP as stocks with upcoming investor meetings that could serve as bullish catalysts.
“Of course concerns remain around trade (notably NAFTA) and longevity of commodity markets, but our sense is that improved industrial capital spending could prolong a period of railroad earnings expansion,” Oglenski said.
So far in 2018, the iShares Dow Jones Transport. Avg. (ETF) IYT is up just 0.6 percent.
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