Air freight plays a crucial role in supporting global trade and the booming e-commerce industry. With the increasing demand for fast and reliable transportation of goods, air freight companies are poised to benefit from this trend.
Against this backdrop, investing in fundamentally sound stocks AerCap Holdings N.V. (AER), Universal Logistics Holdings, Inc. (ULH), and Radiant Logistics, Inc. (RLGT) could be beneficial for investors, as these companies seem well-positioned to capitalize on the industry's growth.
Despite facing numerous challenges, such as capacity constraints, rising costs, and supply chain disruptions, the air cargo market is expected to rebound. Industry experts predict that the air cargo sector will experience a surge in capacity in 2023 as the belly space of passenger flights recovers. This recovery is expected to alleviate the current capacity constraints and potentially result in a decline in freight rates.
Moreover, the air cargo industry is set to experience a rapid acceleration in the trend of digitization throughout 2023. Carriers and airports worldwide are expected to continue investing in process automation, leveraging Artificial Intelligence (AI).
Additionally, in 2022, the global air freight market reached $287.40 billion. Moving ahead, the market is anticipated to expand even further and reach $413 billion by 2028, exhibiting a CAGR of 5.7% from 2023 to 2028.
The industry’s growth is fueled by several factors, including the increasing demand for efficient and rapid transportation of goods internationally, the remarkable expansion of the e-commerce industry, growing import and export activities between countries, advancements in technology, and the emergence of the aviation industry.
With that being said, let us evaluate the fundamentals of the featured stocks in detail:
AerCap Holdings N.V. (AER)
Headquartered in Dublin, Ireland, AER is engaged in leasing, financing, selling, and managing commercial flight equipment. It offers aircraft asset management services, such as remarketing aircraft and engines; collecting rental and maintenance rent payments, monitoring aircraft maintenance, monitoring and enforcing contract compliance, etc.
On May 22, AER entered into lease agreements with ASKY, the pan-African airline based in Togo, for the lease of two pre-owned Boeing 737-8 MAX aircraft. These aircrafts’ scheduled delivery is expected to occur between June and August 2023. Adding ASKY as a customer expands AER’s footprint in Togo and contributes to the company's overall revenue.
In the same month, AER fulfilled a leasing agreement for four brand-new Airbus A321neo aircraft with Air India, the national airline of India. Peter Anderson, AER’s Chief Commercial Officer, expressed his enthusiasm for Air India's current phase, marked by its return to Tata Group ownership and the fleet transition aimed at addressing the fast-growing Indian aviation market.
He stated that AER is thrilled to contribute to Air India's fleet transformation by providing the initial set of NEO aircraft on an operating lease. Further, this reflects the company’s strong demand for its offerings over its peers.
AER’s total revenues increased 4.2% year-over-year to $1.87 billion in the first quarter (ended March 31, 2023), while its total expenses declined 65.4% from the year-ago value to $1.41 billion. The company’s attributable net income and EPS amounted to $432.11 million and $1.79, compared to a net loss and loss per share of $2 billion and $8.35, in the same period last year, respectively.
The consensus revenue estimate of $1.80 billion for the second quarter (ending June 30, 2023) represents an increase of 7.5% year-over-year. The consensus EPS estimate of $1.72 for the ongoing quarter reflects a 23% improvement year-over-year. Moreover, it surpassed the revenue and EPS estimates in each of its trailing four quarters, which is excellent.
Additionally, AER’s revenue and net income have grown at CAGRs of 12% and 12.8% over the past three years, respectively, while its total assets have grown at a CAGR of 13.9% over the same period.
Over the past year, the stock has gained 61.4% to close the last trading session at $61.20.
AER’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Sentiment and Quality. In the 15-stock B-rated Air Freight & Shipping Services industry, it is ranked #2. To see additional ratings of AER for Growth, Value, Momentum, and Stability, click here.
Universal Logistics Holdings, Inc. (ULH)
ULH offers logistics and transportation solutions. It provides truckload services, domestic and international freight forwarding, and final mile and ground expedite services. The company serves the automotive, steel, oil and gas, alternative energy, and manufacturing industries and other transportation companies.
For the first quarter that ended April 1, ULH’s total operating revenues amounted to $437.39 million, while its total operating expenses declined 14.3% from the year-ago value to $399.20 million. The company’s net income and EPS stood at $24.88 million and $0.95 for the same period, respectively.
During the same period, its cash and cash equivalent amounted to $76.78 million, increasing 62.7% versus $47.18 million as of December 31, 2022.
Street expects ULH’s revenue and EPS for the second quarter (ending June 30, 2023) to be $448.10 million and $1.01, respectively. EPS and revenue are expected to increase by 31.2% and 2.8% year-over-year to reach $5.55 and $1.84 billion in the fiscal year 2024. Moreover, it surpassed the revenue and EPS estimates in three of its trailing four quarters, which is impressive.
Over the past three years, ULH’s EBITDA and net income have grown at CAGRs of 20.8% and 67.1%, respectively. Likewise, its EPS and EBIT have improved at CAGRs of 70.2% and 33.6% over the same period, respectively.
The stock has gained 11.3% over the past month to close the last trading session at $29.27.
ULH’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Value and Stability. Within the same industry, it is ranked #3. Click here to see ULH’s ratings for Growth, Momentum, Sentiment, and Quality.
Radiant Logistics, Inc. (RLGT)
RLGT is a third-party logistics company that provides technology-enabled global transportation and value-added logistics solutions. It offers domestic, international air, and ocean freight forwarding services; and freight brokerage services, including truckload and intermodal services. In addition, the company also provides logistics and supply chain services.
On June 1, RLGT announced the continued expansion of its Service by Air (SBA) network with a new location in Boston, Massachusetts. By Leveraging RLGT’s advanced technology platform, purchasing influence, and extensive global network, the Boston location is set to offer a comprehensive range of domestic and international freight forwarding and logistics services.
In the third quarter of fiscal 2023 (ended March 31, 2023), RLGT’s revenues amounted to $244.17 million, while its total operating expenses declined 43.9% from the year-ago value to $237.91 million. The company’s net income stood at $4.54 million and $0.08 per share for the same period.
During the same period, its cash and cash equivalent amounted to $51 million, increasing 108.7% compared to $24.44 million as of June 30, 2022.
Analysts expect RLGT’s revenue and EPS for the fiscal year 2024 to increase 2.8% and 6.4% year-over-year to $1.13 billion and $0.67, respectively. Its EPS is expected to improve by 24.6% per annum over the next five years. Additionally, the company surpassed the EPS estimates in three of the trailing four quarters.
Its revenue and net income have grown at CAGRs of 16.4% and 49% over the past three years, respectively. Likewise, its EPS and EBIT have grown at CAGRs of 50.6% and 39.8% over the same period, respectively.
RLGT’s shares have gained 31.9% over the past six months to close the last trading session at $6.61.
It’s no surprise that RLGT has an overall rating of B, which equates to Buy in our proprietary rating system. It has an A grade for Value and Sentiment and a B for Quality. Out of 15 stocks in the same industry, it is ranked first.
In addition to the POWR Ratings we’ve stated above, we also have RLGT’s ratings for Growth, Momentum, and Stability. Get all RLGT ratings here.
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AER shares were trading at $61.20 per share on Monday afternoon, down $0.41 (-0.67%). Year-to-date, AER has gained 4.94%, versus a 15.35% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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