The Zacks Transportation - Shipping industry faces challenges due to high inflation, uncertainty surrounding the Federal Reserve’s future rate cut plans, and tariff-related tensions. and lingering supply-chain disruptions. Geopolitical and environmental woes represent further challenges.

Despite the uncertainty concerning demand, the industry demonstrates resilience, especially for companies prioritizing growth and operational efficiency. Companies like Frontline FRO, FLEX LNG Ltd. FLNG and Golden Ocean Group GOGL stand out for their ability to navigate these challenges.

Industry Overview

The companies belonging to the Zacks Transportation - Shipping industry, which is cyclical in nature, offer liquefied natural gas and crude oil marine transportation services under long-term, fixed-rate contracts with energy and utility bigwigs. Most participants focus on the seaborne transportation of crude oil and other oil products globally. The industry also includes players that own, operate and manage liquefied natural gas carriers. Some participants are owners and operators of containerships for charter. The change in the e-commerce landscape due to the coronavirus impact implies that shippers are relying more on third-party logistics providers. The well-being of the industry participants is directly proportional to the health of the economy. The resumption of economic activities after coming to a standstill during COVID-19 bodes well for the industry.

3 Shipping Industry Trends in Focus

Supply-Chain Disruptions & High Costs: Although economic activities picked up from the pandemic gloom, supply-chain disruptions continue to dent shipping stocks. Increased operating costs are also limiting bottom-line growth. Due to supply-chain troubles, costs will likely continue to be steep going forward. Shipping costs are on the rise due to the Red Sea crisis. Increasing operational costs and wage pressures weigh on shipping stocks’ financial performance. Slower recovery in discretionary spending creates headwinds. Together, these factors underscore the need for careful cost management and strategic planning to navigate short-term pressures in an evolving market environment.

Tariff Turmoil — A Key Headwind: The current administration is focused on protectionism that restricts international trade to help domestic industries. Tariff tensions are heating up, with new tariffs levied by the U.S. federal government, which has impacted the United States’ biggest trading partners — Canada, Mexico and China. With retaliatory tariffs against the United States, trade tensions are escalating. The shipping industry is responsible for transporting goods involved in world trade. The slowdown in trade may disrupt trade routes, bringing down goods transportation, in turn hurting the industry players. This trade war is expected to result in increased volatility and uncertainty going forward.

Environmental Woes: The shipping industry accounts for part of the world's greenhouse gas emissions, which have increased significantly in the last decade. The International Maritime Organization (IMO) aims to reduce greenhouse gas emissions from ships by at least 20% by 2030. The industry's aim to reduce carbon emissions may suffer a setback as the Red Sea crisis compels it to use more vessels and take longer routes to ensure the smooth sailing of global maritime trade. The longer travel times are increasing total emissions from the fleet for the same amount of cargo. The disruption has naturally raised doubts about the industry's ability to meet the IMO's above mandate. 

Zacks Industry Rank Indicates Dull Prospects

The Zacks Transportation - Shipping industry lies within the broader Zacks  Transportation  sector. The industry currently carries a Zacks Industry Rank #207, which places it in the bottom 16% of 247 Zacks industries.

The group’s Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates murky near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

Looking at the aggregate earnings estimate revisions, it appears that analysts are pessimistic about this group’s earnings growth. As a matter of fact, the industry’s earnings estimate for 2025 has gone down 20.8% year over year.

Before we present a few stocks that you may want to add to your portfolio, let’s look at the industry’s recent stock-market performance and its valuation picture.
 

Industry Underperforms the S&P 500 and Sector

The Zacks Transportation - Shipping industry has lagged the Zacks S&P 500 composite index and the broader sector over the past year.

Over this period, the industry has declined 26.5% compared with the S&P 500 Index’s northward movement of 13.7%. The broader sector has declined 9.9% in the same timeframe.

One-Year Price Performance

Industry's Current Valuation

Based on the forward 12-month price-to-earnings (P/E- F12M), a commonly used multiple for valuing shipping stocks, the industry is currently trading at 6.44X compared with the S&P 500’s 21.23X. It is also below the sector’s P/E (F12) reading of 15.47X.

Over the past five years, the industry has traded as high as 11.41X, as low as 4.08X and at the median of 5.94X.

P/E Ratio (Forward 12-Month)

3 Transportation-Shipping Stocks to Buy Now

Frontline Plc, based in Limassol, Cyprus, focuses on the seaborne transportation of crude oil and oil products worldwide. Continued fleet expansion initiatives are aiding the tanker company’s performance. FRO’s portfolio is one of the youngest among the tanker operators 

FRO currently carries a Zacks Rank #2 (Buy). FRO has seen the Zacks Consensus Estimate for 2026 earnings being revised 19.7% upward over the past 60 days. FRO shares have jumped 16.6% over the past three months.

You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here  

Price and Consensus: FRO

FLEX LNG: Impressive demand for LNG bodes well for FLNG. Efforts to reward its shareholders through dividends attest to the company’s financial well-being.

FLEX LNG currently carries a Zacks Rank #2. The Zacks Consensus Estimate for 2026 earnings indicates an increase of 11.6% on a year-over-year basis.

Price and Consensus: FLNG

Golden Ocean Group owns and operates a fleet of dry bulk vessels worldwide. GOGL operates dry bulk vessels comprising Newcastlemax, Capesize, Panamax, and Ultramax in the spot and time charter markets. GOGL’s vessels transport a range of bulk commodities, such as ores, coal, grains, and fertilizers.

GOGL currently carries a Zacks Rank #2. The Zacks Consensus Estimate for 2026 earnings suggests an increase of 17% on a year-over-year basis.

Price and Consensus: GOGL

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Frontline PLC (FRO) : Free Stock Analysis Report

Golden Ocean Group Limited (GOGL) : Free Stock Analysis Report

Flex LNG Ltd. (FLNG) : Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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