Transportation stocks are drawing attention as investors reassess the sector. Package delivery, trucking and freight brokerage each present different operating challenges.
BNN Bloomberg spoke with Ari Rosa, transportation equity research analyst at Citi, about his three stock picks and the factors shaping his assessment of the sector.
Key Takeaways
- Fuel costs are largely passed through to transportation customers, but higher prices could weaken consumer spending and freight demand.
- Rising interest rates and economic uncertainty have driven a transportation stock sell-off that Rosa believes has created buying opportunities.
- UPS offers a dividend yield near seven per cent and trades near its 52-week low, with Rosa seeing value despite Amazon and union concerns.
- Saia’s national expansion has stabilized, creating potential for margin improvement as the trucking company grows faster than its larger peers.
- C.H. Robinson’s proposed RXO acquisition and use of artificial intelligence could create opportunities after liability concerns and acquisition skepticism weighed on its shares.
Read the full transcript below:
ANDREW: Hot Picks. We’re looking at transportation stocks. People aren’t delighted. Investors in that sector aren’t delighted to see higher fuel costs. Our guest says there are opportunities, though. Here we’re joined by Ari Rosa, transportation equity research analyst at Citi. Ari, thanks very much for coming on the show.
ARI: Of course, my pleasure. Always nice to see you.
ANDREW: I know they vary, these transport stocks, in their exposure to fuel costs, but presumably the rise in diesel to record levels is worrying investors.
ARI: So it’s an interesting set-up. For most transportation companies, fuel is actually a pass-through cost, and so it’s really the — their customers that bear that cost. The bigger concern, as it relates to fuel, is really around demand destruction, right? And, you know, we’re looking at an environment with rising interest rates, with higher fuel costs, and the question is, how much can the consumer take? And we’ve seen a pullback in many of our stocks and many of our transportation names on the basis of really broader macro concern that the combination of fuel costs and interest rates and economic uncertainty really could have an impact on freight demand. But that’s actually where we think there’s some opportunity because of that sell-off.
ANDREW: UPS, you say some investors have been wary of the name partly because I think they lost some Amazon business or gave it up because of low margins, and there have been other worries, including union questions.
ARI: That’s exactly right, and so, you know, we’re a little bit bottom-fishing in calling out UPS, but we do think it’s an interesting contrarian play. Look, it has close to a seven per cent dividend yield, which is very attractive. Of course, we don’t see the dividend as being at risk. It’s a blue-chip name in our space. Obviously, has global exposure and is really integral to the global economy. And so, it’s a name that we like. Again, it’s trading near its 52-week low. I’ll tell you, it’s trading also near its largest discount to the broader market in history. And so, this is a name. If you — if you have a little bit of a contrarian bent, I think UPS is an interesting one to look at. And exactly as you mentioned, there’s a little bit of concern around they’ve lost some Amazon business. That was really a negotiation or a debate over what’s the appropriate price that Amazon should be paying UPS for this service, and they just had a disagreement. But now a lot of that — that Amazon decline has stabilized, and then the other concern with UPS, of course, is its union. That continues to be an overhang and will weigh on sentiment. But we think actually they’re in a somewhat better place relative to the last time they had this contract negotiation come up in 2023.
ANDREW: You have a company, an idea for us here called Saia. It’s a less-than-truckload transport company.
ARI: Yeah, so this is a new pick for us. And Saia is, you know, it’s an interesting name because it’s a smaller trucking company than some of its larger peers, whether that be FedEx Freight or XPO or Old Dominion. But Saia is a company that recently reached national scale, so they did a very aggressive national expansion that weighed a bit on margins. But now, you know, kind of similar to UPS, they’re now at a place where that national expansion is stabilized, and so we think there’s margin improvement opportunity off of that. And we recently caught up with the company just before the quarter — or just before the quarter ended, and, you know, they sounded positive on — on third quarter. Sounded positive on the pricing opportunity, and so we do like Saia a lot here. Again, it’s a bit of a discount to its larger peers, and yet it is growing faster, and we think has more margin upside opportunity than many of its kind of more expensive competitors.
ANDREW: And then finally C.H. Robinson, which is a big brokerage company or a huge freight broker, and they’re involved in a proposed merger.
ARI: That’s exactly right. And so C.H. Robinson had kind of gotten a one-two punch because first there were some questions around broker liability: where — to what extent are brokers liable in the case where a third-party trucker that they contract with gets in an accident? That had initially taken the stock down. You can see it was trading at $200 — north of $200 a share as recently as July, and here it is today at $138, and so it has sold off a lot. And then you couple that with this week — earlier this week they announced an acquisition of one of their large public competitors, RXO, and that really opens up a lot of opportunity for them. And what’s interesting about C.H. Robinson and what had driven up the stock, you know, significantly over the last one to two years is that they were demonstrating how AI can be leveraged within transportation, and they have a very strong management team that’s very adept at using technology to drive efficiency. And yet, right now, it’s out of favour with investors. So we really see an opportunity to buy a quality business that’s deeply ingrained in the North American transportation system at a discount. And so that — that’s the reason we like C.H. Robinson.
ANDREW: Thank you very much. It’s always great to hear from you, Ari.
ARI: Absolutely, my pleasure.
ANDREW: Ari Rosa of Citi bringing us some ideas there in transportation.
| DISCLOSURE | PERSONAL | FAMILY | PORTFOLIO/FUND |
|---|---|---|---|
| UPS:NYSE | N | N | Y |
| SAIA:NASDAQ | N | N | N |
| CHRW:NASDAQ | N | N | Y |
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This BNN Bloomberg summary and transcript of the Oct. 8, 2026 interview with Ari Rosa are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.
