3 Stocks That Benefit From Cheaper Fuel Prices

Despite anticipations of sharp increases in oil prices due to the war in Eastern Europe, prices have plummeted. On Monday, the news of a slowing Chinese economy led the American benchmark to fall below the $90 per barrel mark. Benchmark diesel prices declined Monday to $4.91 a gallon, falling for the eighth consecutive week.

Moreover, gas prices declined more than 21% from their peak of $5.01 per gallon in mid-June to $3.94 on Wednesday.

Falling fuel prices indicate more economical shipping. Trucking CEOs expect to maintain pricing power as retailers, manufacturers, and consumers adjust to disruptions from Covid lockdowns, the Russia-Ukraine war, and inflation. Improvements in the supply chain are also expected to keep the industry buoyed.

Moreover, container shipping is expected to post a strong performance in 2022, as container rates are expected to stay high. Container shipping performance is expected to be supported by higher freight rates.

Given this backdrop, we believe these fundamentally strong stocks, FedEx Corporation (FDX), Universal Logistics Holdings, Inc. (ULH), and Schneider National, Inc. (SNDR), might be solid buys now.

FedEx Corporation (FDX)

FDX is a global logistics company that provides transportation, e-commerce, and business services. The company operates through the FedEx Express; FedEx ground; FedEx Freight; FedEx Services; and Corporate, Other, and Elimination segments.

On August 12, FDX declared a quarterly dividend of $1.15 per share on its common stock. The dividend is payable to stockholders on October 3. This reflects upon the shareholder return ability of the company.

Earlier in August, AI-enabled robotic solutions company Berkshire Grey, Inc. (BGRY) and FDX announced an expansion in their strategic relationship through an agreement to develop activities that should provide broader AI robotic automation capabilities that enables to improve the safety and efficiency of FDX’s global package handling operations. 

FDX’s total revenue increased 8.1% year-over-year to $24.39 billion in the fourth quarter ended May 31. Its total operating income grew 7.1% from the year-ago value to $1.92 billion. Its non-GAAP net income improved 32.3% year-over-year to $1.80 billion. The company’s non-GAAP EPS increased 37.1% from its year-ago value to $6.87.

The consensus EPS estimate of $5.24 for the first quarter (ending August 2022) indicates a 19.9% improvement year-over-year. The consensus revenue estimate of $23.68 billion for the same quarter represents an increase of 7.6% from the same period last year.

The stock has gained 7.2% over the past month and 1.9% over the last five days to close its last trading session at $233.42.

FDX’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

FDX is rated a B in Quality. Within the A-rated Air Freight & Shipping Services industry, it is ranked #6 of 17 stocks. To see additional POWR Ratings for Growth, Value, Momentum, Stability, and Sentiment for FDX, click here.

Universal Logistics Holdings, Inc. (ULH)

ULH provides transportation and logistics solutions in the United States, Mexico, Canada, and Colombia. The company provides truckload services, domestic and international freight forwarding, customs brokerage services, and final mile and ground expedite services.

On July 28, ULH declared a dividend of $0.105 per share of common stock, payable to shareholders on October 3. This reflects upon the company’s ability to pay back its shareholders.

ULH’s total operating revenues came in at $527.18 million for the second quarter ended July 2, representing a 24.7% year-over-year growth. Its income from operations grew 106.5% from the prior-year quarter to $64.65 million, while its non-GAAP EBITDA rose 69.2% from the same period last year to $90.89 million. EPS increased 77.9% from the prior-year period to $1.69.

Analysts expect ULH’s revenue for the third quarter ending September 2022 to be $494.30 million, indicating a 10.9% year-over-year growth. The company’s EPS for the same quarter is expected to increase 81.6% from the prior-year quarter to $1.35. Additionally, ULH has topped consensus EPS estimates in each of the trailing four quarters, which is impressive.

ULH has gained 104.5% year-to-date and 115.9% over the past six months to close its last trading session at $38.56.

It is no surprise that ULH has an overall A rating, which translates to Strong Buy in our POWR Ratings system. ULH has an A grade for Growth and Sentiment and a B for Value, Momentum, and Stability. It is ranked #1 in the A-rated Air Freight & Shipping Services industry.

Beyond what we’ve stated above, we have also given ULH a grade for Quality. Get all the ULH ratings here.

Schneider National, Inc. (SNDR)

SNDR provides surface transportation and logistics solutions in the United States, Canada, and Mexico. The company operates through three broad segments: Truckload; Intermodal; and Logistics.

Earlier in August, SNDR announced the launch of its digital marketplace. The company intends to expand its Schneider FreightPower technology lineup to create a digital marketplace for bulk shippers. The digitization of its bulk industry operations might benefit the company.

For the second quarter of 2022, SNDR’s operating revenues increased 28.4% year-over-year to $1.75 billion. Its income from operations grew 40.4% from its previous-year quarter to $176.60 million. Adjusted net earnings and adjusted net earnings per share came in at $128.40 million and $0.72, up 20.6% and 20% from the prior-year period.

Street EPS estimate for the fiscal third quarter (ending September 2022) of $0.68 reflects a rise of 10.1% year-over-year. Likewise, Street revenue estimate for the same quarter of $1.73 billion indicates an improvement of 20.1% from the prior-year period. Additionally, SNDR has an impressive surprise earnings history, as it has topped consensus EPS estimates in each of the trailing four quarters.

Over the past year, SNDR’s stock has gained 12.2% to close its last trading session at $24.74. It has gained 9% over the past month.

This promising prospect is reflected in SNDR’s POWR Ratings. SNDR has an overall B rating, translating to Buy in our POWR Ratings system.

SNDR has a B grade for Value and Momentum. It is ranked #5 of 22 stocks in the Trucking Freight industry. Click here to see the additional POWR Ratings for SNDR (Growth, Stability, Sentiment, and Quality).

FDX shares were trading at $235.16 per share on Thursday afternoon, up $1.74 (+0.75%). Year-to-date, FDX has declined -8.31%, versus a -9.11% rise in the benchmark S&P 500 index during the same period.

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.

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