The financial year just closed was a good one for major transport companies, which is perhaps somewhat surprising given the weak fundamentals of declining commodity prices and lacklustre consumer spending. In the face of those weak fundamentals however, with the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) up 17% for the year, the following three transport stocks all outperformed the index.
Port, road and rail operator Asciano (ASX: AIO), which operates an expansive fleet of trains and trucks, as well as terminals at major ports throughout the country, started the year at $4.16 and finished at $5.02, pulling in an index-beating gain for investors of nearly 21%.
Rail freight operator Aurizon Holdings (ASX: AZJ), which undertook a name change during the year from QR National, began the financial year trading at $3.42 and climbed to finish the year at $4.16, providing a gain for shareholders of 21.6%. Aurizon is heavily exposed to coal freight in Queensland which the company has been working hard to diversify away from. The performance of Aurizon was particularly pleasing given the headwind created by declining coal prices.
Global freight and logistics operator Toll Holdings (ASX: TOL) outperformed both Asciano and Aurizon, with its share price surging from $3.86 at the start of the 2013 financial year to $5.32 last Friday, a return of 38%. The change in management styles from the empire-building Mr Paul Little to the cost-cutting and efficiency focussed Mr Brian Kruger was likely a major factor in Toll stock regaining favour with investors.
The high fixed cost base of transport companies mean they are significantly leveraged to higher volumes of business. While some economists are debating the potential for Australia to fall into recession in the near future, many other market commentators have a positive outlook for the economy over the next 12 months. If the economy continues to expand, this would bode well for transport stocks.
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Motley Fool contributor Tim McArthur owns shares in Toll Holdings.