Online shopping has witnessed a rise this year owing to the pandemic-driven lockdowns and stay-at-home orders. People have mostly avoided brick-and-mortar stores for their shopping needs to curb the risk of exposure to the virus. This in turn has helped logistics companies in doing well too despite the various restrictions imposed which led to disruption of supply chains. This is because the e-commerce companies are dependent on logistics services to deliver the ordered products to their customers.
E-commerce sales have been going strong this year with third-quarter sales up 36.7% year over year, as reported by the National Retail Federation. Moreover, the holiday season also begun on a positive note with online retail sales faring well. In fact, per a report by CBRE Group, Inc. CBRE, total online holiday sales are expected to increase 40% on a year-over-year basis to $234.9 billion. Notably, the report further mentioned that up to $70.5 billion of the goods purchased are expected to be returned by customers. This will be 73% higher from the previous five-year average. This kind of a situation also bodes well for logistics companies. Goods purchased online are returned by customers due to various issues. Hence, retailers also need reverse logistics services to pick up the products from customers and deliver them back to distributors or manufacturing companies.
Even when the economy opens up completely as the COVID-19 vaccine distribution picks up; online shopping is expected to continue to do well. In fact, Statista predicts e-commerce sales as a percentage of total retail sales to rise to 13.7% in 2021 following an expected rise of 12.4% in 2020 compared to 11.1% in 2019. This is because online shopping offers customers more convenience compared to visiting a physical store. Customers can enjoy the comfort of sitting at home while searching for their desired products. This convenience is sure to take the trend forward. Breakthrough on the coronavirus vaccine front is now surely expected to open up the economy. This will help various supply chain constraints which have been plaguing the logistics sector to ease. Hence, online retailers will be able to ensure that the products are delivered to customers at shorter periods of time.
4 Top Buys
With online shopping gaining precedence due to the pandemic and all set to continue going ahead, logistics companies are sure to do well. The vaccine rollout should also help ease supply chain constraints. Hence, this seems to be a prudent time to invest in logistics companies that handle the delivery of online goods. Notably, we have selected four such stocks that carry a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Forward Air Corporation FWRD, along with its subsidiaries, operates as an asset-light freight and logistics company in the United States. Under the Expedited Freight segment, the company provides expedited regional, inter-regional, and national less-than-truckload services; local pick-up and delivery services, among others. The company currently has a Zacks Rank #1. The Zacks Consensus Estimate for its current-year earnings increased 38.7% over the past 60 days. The company’s expected earnings growth rate for next year is 48.7%.
Expeditors International of Washington, Inc. EXPD provides logistics services in the United States. The company offers airfreight services, intra-continental ground transportation and delivery, and warehousing and distribution services, among others. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings increased 8.8% over the past 60 days. The company’s expected earnings growth rate for the current year is 14.8%.
Echo Global Logistics, Inc. ECHO provides technology-enabled transportation and supply chain management solutions in the United States. The company offers services in various transportation modes, such as truckload, less-than truckload, small parcel, domestic air, and expedited and international along with various transportation management and logistics services. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings increased 26.6% over the past 60 days. The company’s expected earnings growth rate for next year is 40.3%.
United Parcel Service, Inc. UPS provides letter and package delivery, specialized transportation, logistics, and financial services in the United States. Under the U.S. Domestic Package segment, the company offers time-definite delivery of letters, documents, small packages, and palletized freight through air and ground services in the United States. The company currently has a Zacks Rank #2. The Zacks Consensus Estimate for its current-year earnings increased 9.9% over the past 60 days. The company’s expected earnings growth rate for next year is 8.6%.
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United Parcel Service, Inc. (UPS) : Free Stock Analysis Report
Expeditors International of Washington, Inc. (EXPD) : Free Stock Analysis Report
Forward Air Corporation (FWRD) : Free Stock Analysis Report
Echo Global Logistics, Inc. (ECHO) : Free Stock Analysis Report
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