Citi analyst Ariel Rosa is taking a “constructive” view on the North American Transportation and Logistics Industry, seeing a “cyclical downturn in transports is in its late stages, with rates and margins near trough, offering the prospect of strong earnings growth in 2025 and into 2026 as rates recover.”
“Nevertheless, we believe reasonable valuations relative to normalized earnings offer potential upside as the market begins to anticipate a gradual improvement in the freight cycle,” said Mr. Rosa. “Our top picks are JBHT, SAIA, CSX, and UPS, which we segment based on investment style and size .”Analyst: “CNI has made multiple downward revisions to its outlook, partly due to ongoing labor relations, which appears to be putting inflationary pressure on its cost structure.
“The playbook seems to be transitioning from an equity investment standpoint, but we are still sticking to a focus on quality of assets and defensive growth profiles,” he said. “We expected moves at the short end of the curve to push equity investors into yield product and for REITs to be a beneficiary. That appears to have happened. Given a focus on fundamentals, we don’t entirely agree with some of the undiscerning chasing of higher yields in spite of prevailing fundamentals.
Analyst: “Our highest total return to target for the industrial segment goes to Dream Industrial, again, as the REIT remains relatively inexpensive vs. its medium-term growth outlook. DIR’s ability to grow its NOI is driven by its exposures to Canadian urban mid-Bay properties. As was highlighted at its investor day, demand for this segment has remained more resilient supporting elevated market rents, with still a significant MTM opportunity.
“We expect the waste & recycling sector to continue to generate above average returns on investment, and given the stable, low-risk, and growing nature of these businesses, we view these companies as important core holdings in a diversified equity portfolio,” he said. “However, large-cap waste management stocks are trading at relatively high valuations, compared to both historic norms and the wider market.
“Waste Connections has a very strong long-term track record of creating value for all its stakeholders since its founding in the late 1990s, thanks to a very high-quality corporate culture that underpins our expectation for continued success,” he said. “We are similarly optimistic that GFL Environmental can continue its slightly shorter but similarly impressive growth and value creation track record.
“The strength of the WELL Health partnership ensures that HEALWELL draws interest from the strongest potential acquisitions where prospective revenue synergies support unique earnout economics,” he adde. “Consequently, we see HEALWELL positioned to follow a comparable acquisitive growth strategy to WELL Health where HEALWELL functions as WELL’s vehicle for efficient capital allocation, targeting preventive health and AI ventures.