BOSTON ( TheStreet) -- With the U.S. economy growing for a sixth straight quarter, companies in shipping, railroads, trucking and package delivery are expected by analysts to post big earnings gains this year. Some have already seen spectacular share-price increases.
Traffic volume has risen all along the so-called supply chain, despite rising fuel costs, Middle East and African political turmoil and its potential impact on shipping and oil supplies, and the still evolving nuclear crisis in Japan.
Container freight volume coming into U.S. ports has jumped 8.5% from the beginning of January through March 23, a pace last seen in pre-recession 2007 when inbound freight boxes reached a record 18.9 million, according to Zepol, a firm that tracks shipping data. "The rebound (in shipping activity) has come much faster than we anticipated," said Paul Rasmussen, the firm's president, in an interview Tuesday.
Helping boost investor confidence in the highly cyclical transportation sector is the growth of U.S. exports, a decided shift from the virtual, one-way street of goods from Asia into the U.S. of only a few years ago. That's because of growing U.S. industrial production, the relatively cheap dollar and the continued expansion of middle-class populations in emerging markets, which have an insatiable appetite for American goods.Freight traffic is on the rise domestically as well. The volume of goods sent by rail rose 6% in the first nine weeks of this year versus the comparable period last year, led by increases in shipments of iron ore, coal, cars, equipment and petroleum products, according to the Association of American Railroads (AAR). Indicative of the industry's long-term optimism, the nation's freight railroads plan to spend a record $12 billion on capital improvements this year, up 10% from last year, the AAR said. And package-delivery firms such as United Parcel Service (UPS - Get Report) and FedEx (FDX - Get Report), true bellwethers of the global economy, are reporting steady traffic growth. FedEx CEO Fred Smith said two weeks ago in a conference call that "we are very optimistic about future earnings" because "the dynamics of global trade appear solid." In the U.S., gross domestic product has expanded for six quarters in a row after the deepest recession in 80 years. But industry players are nibbling at one another's cheese, with higher fuel costs as a catalyst. Standard & Poor's said high fuel prices in 2008 "accelerated the conversion of truck freight to intermodal (containerized freight) as shippers become even more focused on lowering transportation expenses." And at the other end of the supply chain, package-delivery firms are nipping at larger trucking firms' business, by taking on bigger freight. Fuel costs, a key factor in any mode of transport and an occasional outsized challenge to the industry in prior years, aren't as big a challenge as in the past. That's because most companies now have fuel-surcharge clauses built into their contracts that allow them to recoup increases, or they're able to pass the higher costs along to customers. Railroad stocks are up an average 10% this year through March 28, trucking shares 8.4%, and shipping and port companies 6%, as tracked by Morningstar. The S&P 500 Index has gained 4.6%. Here are reviews of seven highly rated supply-chain stocks: