In the age of Amazon and a revving global economy, few sectors have investors more excited than transportation. People, products and packages are circling the world at an ever growing rate, fueling the bottom lines of shippers, airlines and railroads alike.
Both the Dow Jones Transportation Index and the S&P Transportation Select Industry Index gained 20%-plus in 2017, aided by long-term trends like the relentless rise of e-commerce shipments and strengthening economic growth in the developed and emerging markets. It is the United States that continues to lead the way.
Three U.S. firms, United Parcel Service, FedEx and Union Pacific top the 2018 Forbes Global 2000 transportation ranking. While UPS remains the industry leader by sales, ascendant FedEx and its billionaire founder Fred Smith appear poised to soon top the industry’s ranks due to the company’s surging profits and market value. It rose from #194 on the Forbes Global 2000 to #155, nearly eclipsing UPS’s ranking of #153. Excluding airlines, just about every U.S. transportation company in the Forbes Global 2000 gained ground, with Old Dominion Freight Line and XPO Logistics surging the most. Old Dominion rose 937 spots to join the Forbes Global 2000 at #1712, while XPO – profiled by Forbes in April – gained 476 spots to #1127.
Although couriers and truckers are surging in the U.S., it is railroads that remain the biggest and most profitable transportation companies. Combined, Union Pacific (#175), CSX (#339) and Norfolk Southern (#377) generated $43 billion in profits in 2017 and earned $22 billion in profits, an over 50% margin. U.S. Airlines such as Delta (#224), American (#325), United (#357), Southwest (#380), Alaska (#1355) and JetBlue (#1438) all shed ground. However, in the wake of heavy consolidation reminiscent of the rail industry in the 1990s and early 2000s, these passenger air transport companies are reporting surging profitability. Collectively, they earned $13 billion in 2017 on $160 billion in sales.
Outside of the U.S. it is Japan that dominates, holding twelve transportation companies on the Forbes Global 2000. Rail is the specialty in Japan with six companies on our list, led by the East Japan Railway (#235) and the Central Japan Railway (#250). In air, Japanese carriers All Nippon Airways (#640) and Japan Airlines (#789) lead the way. Other notable companies include West Japan Railway (#679) and Tokyu (#971) on the rails and shippers Nippon Yusen (#1337) and Mitsui OSK (#1401).
If there’s any single region in the globe where transportation companies are uniformly on the rise it is China. Ten transportation companies in the world’s most populous country made the Forbes Global 2000, with each rising significantly in rank. Airlines China Southern and China Eastern ranked the highest at (#553) and (#601), respectively, gaining on North American and European counterparts. Shippers COSCO and Sinotrans gained strongly, as did the Shanghai International Airport, which rose 434 spots to (#1471) on the back of its $590 million in profits and $16 billion market value.
Transportation is emerging as one of the big targets of sovereign and private equity investors as they seek to capitalize on rising commerce. In coming years, it’s likely these big investors will target airports, railroads, container shippers, port terminals, and freight and logistics firms, seeking steady returns. And consolidation is likely to continue. Italy’s Atlantia (#609) is in the throes of a $18 billion takeover bid for Spanish toll road operator Abertis Infrastructure (#766).
Of course, the threat of trade wars coming from President Trump and potential populist shifts against economic integration in Europe risk throwing sand in the gears of the current transportation boom. Barriers and friction, or disappointing growth, risks prematurely ending today’s boom.
The FORBES Global 2000 is an annual ranking of the world’s largest, most powerful public companies, based on equally-weighted measures of revenue, profits, assets and market value. The world’s 25 biggest transportation companies include nine airlines from six countries, eight railroads from five countries, and three parcel giants.
Published by Antione Gara at forbes.com