In this article, we discuss 5 best transportation stocks to buy heading into 2023. If you want to see more stocks in this selection, check out 10 Best Transportation Stocks To Buy Heading Into 2023.
5. Canadian Pacific Railway Limited (NYSE:CP)
Number of Hedge Fund Holders: 41
Canadian Pacific Railway Limited (NYSE:CP) owns and operates a transcontinental freight railway in Canada and the United States. It transports bulk commodities and merchandise freight. On October 26, Canadian Pacific Railway Limited (NYSE:CP) declared a quarterly dividend of $0.19 per share, in line with previous. The dividend is payable on January 30, 2023 to shareholders of record on December 30. It is one of the best transportation stocks to monitor.
On November 28, Deutsche Bank analyst Amit Mehrotra upgraded Canadian Pacific Railway Limited (NYSE:CP) to Buy from Hold with a price target of $98, up from $80.
According to Insider Monkey’s third quarter database, 41 hedge funds were long Canadian Pacific Railway Limited (NYSE:CP), compared to 42 funds in the earlier quarter. Chris Hohn’s TCI Fund Management is the biggest position holder in the company, with 55.8 million shares worth $3.7 billion.
Here is what Pershing Square Holdings specifically said about Canadian Pacific Railway Limited (NYSE:CP) in its Q2 2022 investor letter:
“Canadian Pacific Railway Limited (NYSE:CP) is a high-quality, inflation-protected business led by a best-in-class management team that operates in an oligopolistic industry with significant barriers to entry. With an improving volume and pricing outlook combined with the upcoming transformational acquisition of Kansas City Southern (“KCS”), we believe that CP’s prospects are bright.
CP reported revenue growth of 7% in the second quarter as pricing and mix, fuel surcharge pass-throughs and foreign exchange more than offset a small decline in volumes. CP is leveraging the strong pricing environment to renew contracts at an average price increase of over 6%. Pricing directly benefits earnings as rails pass on increases in fuel and other expenses to customers through contractual fuel surcharges and CPI escalators. In addition to earnings growth, high inflation should help rail transportation take share from trucking and lead to incremental volume growth over time. Customers are choosing cheaper transportation solutions as prices rise, and CP’s mission-critical rail service is often the cheapest or only viable method for transporting heavy freight over long distances. High fuel prices and wage gains also disproportionately increase the cost of trucking, which is up to three times less fuel efficient and much more labor intensive than rail transportation.
The demand outlook for CP continues to improve, especially given the current geopolitical environment. Russia’s invasion of Ukraine and the resulting supply disruptions have boosted demand for Canadian exports such as grain and potash. Deglobalization has also increased the likelihood of major North American onshoring and energy production, which will accelerate CP’s volume growth in the future. Total volumes declined by 2% in the second quarter due to the smaller than average Canadian grain harvest, while volumes excluding grain increased by 5%. The grain headwind will flip to a tailwind in the fall as CP anticipates a normal grain crop, which supports management’s double-digit volume and revenue growth outlook for the second half of 2022. …” (Click here to read the full text)
