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What are we looking for?

The Wuhan coronavirus has dominated news headlines for the past few weeks. Worldwide, there have been more than 40,000 cases of 2019-nCoV confirmed and more than 900 deaths reported, mostly in China. In the markets, the outbreak has affected multiple sectors, with many disruptions to manufacturing and trade. Notably, many stock prices in the transportation sector are down, especially ones operating in Asia.

Today we look for companies in the transportation sector that have been affected during the virus outbreak, but which might still have solid fundamentals.

The screen

We screened the North American companies by focusing on the following criteria:

  • The transportation subsector of the industrials sector;
  • As the coronavirus developments have been dominant in the news for the past 20 days or so, we filtered stocks that are down at least 5 per cent during the same period;
  • A minimum market cap of US$1-billion, as we are targeting large-cap companies only;
  • A positive change in earnings per share over the past 12 months;
  • A positive 12-month change in sales – a positive figure shows that there is growth and progress in the company’s operations;
  • A positive 12-month change in the economic value-added (EVA) metric – a positive figure shows that the company’s profits are increasing at a faster and greater pace than its costs of capital. The EVA is the economic profit generated by the company and is calculated as the net operating profit after tax minus capital expenses.

For informational purposes, we have also included recent stock price, dividend yield and one-year return. Please note that some ratios shown may be as of the end of the previous quarter.

More about Inovestor

Inovestor for Advisors is a fundamental-analysis research platform specializing in the economic value-added (EVA) approach. With Inovestor, advisers can quickly identify attractive investment opportunities, outsource their stock picking by using model portfolios and easily communicate investment decisions with clients through client-friendly reports. In addition, Inovestor allows users to create personalized filters, build custom portfolios and carry out in-depth analysis on more than 13,000 companies (Canadian stocks, U.S. stocks and American depositary receipts).

What we found

We found 14 companies that were potentially affected by the coronavirus news. but appear to have strong fundamentals. Here are three of note.

Air Canada: With a market cap of $12.1-billion, the stock price is down 10.7 per cent in the past 20 days. However, sales are up more than 7 per cent over the past 12 months, with a 525-per-cent change in the EVA metric. The company will be announcing their fourth quarter and full year 2019 financial results on Feb. 18.

Singapore Airlines Ltd.: The company is owned by Temasek Holdings (Private) Ltd., the government of Singapore’s sovereign wealth fund. The stock is down around 7 per cent in the past 20 days. However, Singapore remains a strong global financial hub and the government established strong measures to contain the virus. The stock has sound fundamentals and a good dividend yield of 3.3 per cent, it has low risk, with a beta of 0.44, and is currently trading below book value, with a price-to-book-value ratio of 0.7.

United Airlines Holdings Inc.: United Airlines has the second-biggest market cap on our list, at more than US$20-billion. The stock is down 9 per cent in the past 20 days. The company’s fourth-quarter results, released on Jan. 21, narrowly exceeded Wall Street’s estimates. Although the company doesn’t distribute dividends, it had an average earnings-per-share growth of 30.6 per cent over the past five years.

Investors are advised to do further research before investing in any of the companies listed in the accompanying table.

Select North American-listed transportation stocks 

CompanyTickerMkt. Cap. (US$ Mil.)20D Price Rtn. (%)Sales Chg. 12M (%)EVA Chg. 12M (%)EPS Chg. 12M (%)Div. Yld. (%)Recent Price (US$)1Y Price Rtn. (%)
A.P. Moller - Maersk A/SAMKBF-OTC25,105.0- 28.23 2.0 1,235.95 -8.9
United Airlines Holdings Inc.UAL-Q20,158.1-9.04.7641.0 3.85 n/a 79.48 -14.3
Air Canada*AC-T12,096.7-10.77.8525.4 2.66 n/a 45.46 49.4
J.B. Hunt Transport ServicesJBHT-Q11,951.1-5.56.464.4 0.27 0.9 112.52 0.8
Singapore Airlines Ltd.SINGF-OTC7,288.5-7.32.8154.5 0.01 3.3 6.15 -15.2
Fraport AG Frankfurt AirportFPRUY-OTC7,072.6-9.310.416.7 0.76 n/a 38.28 -5.7
Cosco Shipping Holdings Co.CICOF-OTC4,413.4-16.336.715.4 0.02 n/a 0.36 -7.9
SATS Ltd.SPASF-OTC3,589.4-12.327.786.9 0.01 n/a 3.21 -6.5
ComfortDelGro Corp.CDGLF-OTC3,390.0-10.11.353.9 0.01 n/a 1.57 -9.8
Seaspan Corp.SSW-N2,704.2-10.712.1215.1 0.30 4.7 12.54 29.8
Euronav NVEURN-N2,077.0-24.255.4746.6 1.12 n/a 9.44 27.0
Hamburger Hafen Und LogistikHHULY-OTC1,740.3-5.92.1363.6 0.16 n/a 12.42 10.6
Frontline Ltd.FRO-N1,377.3-37.818.81,641.1 2.00 n/a 7.80 70.1
Scorpio Tankers Inc.STNG-N1,263.4-38.314.9338.5 5.40 1.3 21.73 24.6

Source: Inovestor

* Currency figures for AC in Canadian dollars.

For more details about Air Canada stock and performance, readers can subscribe to the Investor for Advisor platform for free:

Christian Godin is a portfolio manager at Inovestor Asset Management.

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