Moving people and products is a multi-billion-dollar industry, making transportation stocks a solid long-term investment. However, companies that are part of the transportation and logistics sectors have been in the news in recent years due to supply chain disruptions and other macro headwinds, dragging valuations significantly lower.
Here are three TSX stocks that are part of the transportation industry that should be part of your watchlist in 2023.
NFI Group stock
Valued at a market cap of $700 million, NFI Group (TSX:NFI) is the largest manufacturer of ZEBs (zero-emission buses) in North America and the United Kingdom. With a production space of over 3.5 million square feet, it has 14 ZEB-capable facilities that can manufacture 8,000 equivalent units each year.
The demand for battery-powered vehicles is bound to increase globally, which should enable NFI to increase sales from $2.8 billion in 2022 to $4.6 billion in 2024, according to Bay Street analysts. Since 2015, NFI Group has delivered close to 2,900 ZEBs in 13 countries.
The company expects to end 2025 with an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $400 million, with zero-emission buses accounting for 40% of total production.
Priced at 0.20 times forward sales, NFI Group is among the cheapest stocks on the TSX. It’s also trading at a discount of over 20% to consensus price target estimates as of writing.
Canadian National Railway stock
A transportation giant, Canadian National Railway (TSX:CNR) has returned 250% to shareholders in the last 10 years after adjusting for dividends, easily outpacing the TSX. The company is crucial to the Canadian economy and ships $250 billion worth of goods annually, providing it with a wide economic moat.
Despite a sluggish economy, CNR has increased adjusted earnings by 16.5% in the last 12 months. Analysts now expect the bottom line to expand by 9% annually in the next five years. Moreover, CNR pays shareholders an annual dividend of $3.16 per share, translating to a dividend yield of 2%. In the last 10 years, Canadian National Railway has increased dividends by 14% annually.
Cargojet stock
The final TSX transportation stock on my list is Cargojet (TSX:CJT). Since the end of May 2013, CJT stock has returned a whopping 964% to shareholders. It’s also trading 58% below all-time highs, allowing you to buy the dip and benefit from market-beating gains in the next 12 months.
Cargojet provides time-sensitive overnight air cargo services in Canada and operates domestic air cargo network services between 16 Canadian cities.
In recent months, consumers have shifted spending from goods to services and are prioritizing travel and leisure in a post-pandemic world. Cargojet benefitted immensely amid COVID-19 due to the uptick in online sales allowing it to increase revenue from $486 million in 2019 to $980 million in 2022. Analysts now expect sales to decline by 2.3% to $958 million this year.
Cargojet emphasized that consumption behaviour should normalize in the second half of 2023, resulting in a balanced mix of spending between goods and services.
The selloff in CJT stock has increased its dividend yield to 1.1%. These payouts have more than doubled in the last 11 years. Priced at 18 times 2024 earnings, Cargojet stock is trading at a discount of almost 50% to consensus price target estimates.
