Logistics companies control and streamline various facets related to the movement of goods, including warehousing and transportation, from the point of origin to the point of consumption based on customer needs. Logistics, naturally, involves a high degree of coordination between the parties involved in acquiring, storing, and transporting resources and goods on a global scale.

So far in 2024, logistics companies have been hurt by headwinds ranging from supply-chain disruptions, a challenging macroeconomic environment characterized by inflation-induced high interest rates and a weaker-than-expected demand environment. However, cooling inflation and signs of easing supply-chain woes bode well for these companies as we move toward the new year. Keeping an eye on logistics companies like United Parcel Service UPS, C.H. Robinson Worldwide CHRW and Expeditors International of Washington EXPD would be prudent for year-end investors.

Detailed Look at the Headwinds Confronting Logistics Stocks

Supply-chain issues have been prevalent throughout the current year and are resulting in raised warehouse, packaging and other logistics expenses. The shortage of skilled labor in the United States is also concerning.  The companies are witnessing higher prices for labor and freight.  

Geopolitical uncertainty and higher inflation continue to hurt consumer sentiment and growth expectations. The weak demand scenario has also led to a decline in the volume of packages shipped. Due to a decline in shipping demand, particularly in Asia and Europe, volumes are being hurt. Lackluster volumes are hurting the results of key industry players like UPS, which trimmed its full-year 2024 revenue view to $91.1 billion from $93 billion mentioned earlier.

The trimmed revenue forecast highlights that UPS does not expect shipping activities to be buoyant in the final quarter of 2024 due to the slowdown in online sales in the United States, apart from the softness in global manufacturing activities.

Is Relief From These Woes Likely in 2025?

To mitigate the woes resulting from significant levels of inflation, including higher prices for labor, freight and fuel, companies are focusing on cost-cutting measures and making efforts to improve productivity and efficiency demand scenario.  The focus on cost management and improving efficiency will boost margins.

Signs of improving supply-chain conditions also bode well for logistics companies as we head toward 2025.  As stated above, labor shortages represent a key concern, particularly in warehousing and distribution. We believe that automation and robotics may ease some of this strain in 2025. Increased focus on artificial intelligence, blockchain and the Internet of Things is likely to bring about an increase in accuracy, flexibility and speed.

The southward movement in oil prices is also a welcome development for logistics companies. Lower fuel costs are likely to aid bottom-line growth. This is because fuel expenses are a significant input cost for the logistics space. Notably, oil prices declined 14% in the July-September period, mainly due to weakening global demand. China's economy, the world’s largest oil importer, struggled with a slowdown in manufacturing, shrinking for the fifth consecutive month by September.

It is hardly surprising that the pace of growth of e-commerce demand has slowed from the levels witnessed at the peak of the pandemic with the reopening of economies. However, it still remains impressive, driven by the convenience associated with online shopping. E-commerce demand strength should continue to support the growth of players like UPS.

In view of the anticipated improvement, year-end investors would do well to monitor logistics stocks. We have narrowed our search down to three such stocks having a Zacks Rank #3 (Hold) or better.

3 Logistics Stocks to Keep a Tab On

Expeditors currently carries a Zacks Rank #2 (Buy). This Seattle, WA-based freight forwarder’s efforts to reward its shareholders are commendable. EXPD’s liquidity position is encouraging as well. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

EXPD has outshined the Zacks Consensus Estimate in three of the past four quarters (missing the mark on the other occasion). Over the past 30 days, the Zacks Consensus Estimate for 2025 earnings has moved 0.4% north.

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UPS currently carries a Zacks Rank #3. We are appreciative of the company's efforts to reward its shareholders through dividends and buybacks. Robust free cash flow generation by UPS is a major positive and leads to an uptick in shareholder-friendly activities.

Cost-cutting efforts are supporting its bottom line. Impressive e-commerce demand and expansion efforts should serve UPS well in the coming year.  Its earnings outshined the Zacks Consensus Estimate in three of the last four quarters and missed once, the average beat being 1.5%. UPS’ expected earnings growth rate for the next year is an impressive 17% (from 2024’s estimated levels). This is a clear sign that things are looking up for this package delivery company.

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C.H. Robinson currently carries Zacks Rank #3. It operates as an asset-light logistics player. Efforts to control costs bode well for this freight broker. Measures to reward CHRW's shareholders instill further confidence in the stock. CHRW’s liquidity position is encouraging as well.

Over the past 60 days, the Zacks Consensus Estimate for 2025 earnings has moved 2.4% north. CHRW has outshined the Zacks Consensus Estimate in three of the past four quarters (missing the mark on the other occasion).

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United Parcel Service, Inc. (UPS) : Free Stock Analysis Report

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