Detail

The transportation sector is a category of companies that provide services to move people or goods, as well as transportation infrastructure. Technically, transportation is a sub-group of the industrials sector according to the Global Industry Classification Standard (GICS). The transportation sector consists of several industries including air freight and logistics, airlines, marine, road and rail, and transportation infrastructure. These industries are further broken down into the sub-industries air freight and logistics, airlines, marine, railroads, trucking, airport services, highways and rail tracks, and marine ports and services.

The performance of companies in the transportation industry is highly sensitive to fluctuations in company earnings and the price of transportation services. Main factors affecting company earnings include fuel costs, labor costs, demand for services, geopolitical events, and government regulation. Many of these factors are interconnected. For example, if the U.S. government passes regulations that make it more difficult for people to earn their commercial drivers' license, this will reduce the supply of drivers, driving up the cost of hiring drivers.

Oil prices are a key factor for transportation, as the commodity’s price generally has an influence on transportation expenses. Gas and fuel prices that rise will increase costs for a trucking company, eating into their profit and potentially reducing their stock price.

Energy costs and the value of transportation stocks are certainly interrelated. Low energy costs may become a factor in boosting the share price of various transportation companies, but the influence can also be reversed. When demand for transportation services is high the impact will be reflected in quarterly reports of transportation companies. This information may, once disseminated, may motivate energy traders to bid up prices for oil and similar commodities. However, if demand for commercial transportation falls, this information could lead to a decline in oil prices as well.