As the TSX rally gains steam, investors may want to consider investing in sectors that could benefit from the expected improvement in the macroeconomic outlook, for example, transportation.
With the overall economy showing early signs of improvement and interest rates near their peak, transportation stocks could be poised for a rally, especially the ones that haven’t seen much appreciation of late. This is because most transportation companies often thrive when the economy’s doing well. As increased business activities and consumer spending could mean more goods and people need to be transported, it’s likely to drive the demand for transportation services higher.
In this article, I’ll highlight two top TSX transportation stocks I find attractive to buy today and hold for the long term.
Air Canada stock
Air Canada (TSX: AC) is the first transportation stock that you can consider buying on the TSX today. The Saint Laurent-headquartered airline company currently has a market cap of $6.5 billion as its stock trades at $18.24 per share with 5.9% year-to-date losses.
One of the main factors that make Air Canada stock so attractive to buy today is its consistently improving financial growth trends in the post-pandemic era. In the first three quarters of 2023, the largest Canadian passenger airline company has registered a very strong 40.3% YoY (year-over-year) increase in its total sales to $16.7 billion. As a result of strengthening air travel demand, the company posted adjusted earnings of $4.73 per share for these three quarters combined against an adjusted net loss of $2.46 per share in the same period of the previous year.
Interestingly, Air Canada’s adjusted earnings figure in the first three quarters of 2023 has already exceeded its pre-pandemic year 2019’s adjusted earnings of $3.37 per share by a wide margin. Despite these positive factors, this top TSX transportation stock hasn’t seen any appreciation in the last few years and is down 62% from its 2019 closing level of $48.51 per share, making it look way too undervalued to buy for the long term.
Westshore Terminals Investment stock
Westshore Terminals Investment (TSX: WTE) could be another reliable transportation stock to bet on the TSX today. This Vancouver-based company currently has a market cap of $1.7 billion as its stock trades at $27.03 per share with 20.5% year-to-date gains.
While, unlike Air Canada, Westshore’s share prices have risen in 2023 so far, they still look cheap based on the company’s long-term fundamentals. In the first three quarters this year, Westshore’s total revenue jumped 20.4% YoY to $286.1 million. More importantly, higher volume and revenue led to a 45.2% increase in its adjusted earnings for the first nine months of 2023 to $1.51 per share, exceeding Street analysts’ expectations.
Going forward in 2024, Westshore Terminals expects its throughput volumes to be around 25 million tonnes, with the average loading charge at $13.25. Nonetheless, I expect the company to exceed these expectations as an improving economic scenario creates higher demand for its services, which could help it maintain strong financial growth trends and drive its share prices higher.
