3 stocks to keep on trucking as the economy and consumer spending improve

A number of signs showing the economy is improving may work well for the transportation companies that ship goods in and around Australia. The housing market rise is one of them because of the low interest rates. Those same rates benefit companies which can borrow more cheaply for business expansion.

A strong Aussie dollar that may adversely affect domestic exporters can also bring down costs for goods importers. Their revenues rise even more if sales volumes increase. That means more shipping and warehousing. This all leads back to the transportation industry.

The three companies below are starting to see the flow of business improving and are devising new business initiatives to expand services.

The integrated import and export logistics service provider Qube Holdings Ltd (ASX: QUB) has grown its revenue over the past three years with statutory net profit more than tripling since 2010. It operates stevedoring services for containers and export cargo and landside logistics.

Its share price has risen 25.5% in the last 12 months. It has a PE of 24.7 and a dividend yield of 2.1%. It is expanding its involvement with grain handling in NSW and acquiring companies in WA and Queensland for bulk haulage services. This month it hit a new all-time high of $2.33 and is currently $2.21.

Toll Holdings Limited (ASX: TOL) is an international logistics provider covering road and domestic freight, overseas forwarding and express transport. Underlying net profit has been stable over the past several years, but statutory net profit took a hit in 2012 and 2013 due to significant items.

Its PE is 13.4 and it offers a 5.3% dividend yield. In the last few years, the share price has moved sideways between $4 and $6.

For the first half of FY2014, business segment performance was better than in 1H FY2013 and the company is positioned for improvement in the Australian economy.

K&S Corporation Ltd (ASX: KSC) provides logistics and transport solutions as well as warehousing and distribution in Australia and New Zealand. In March, it completed the takeover of Scott Corporation, a bulk solids and hazardous materials transportation company that operates 20 branches across Australia.

In the first half of FY2014, it saw a reduction of demand in transport services and the loss of a contract with Australian Paper, which resulted in a 12% fall in revenue and a 37.8% drop in underlying net profit. Its share price is $1.51 and has an 11.8 PE, about the middle of its historic PE average range. Its dividend yield is 5.9%.

Foolish takeaway

Increased consumer spending should have a knock-on effect for goods shipment. Watching how retailing advances can give a better idea on transportation company progress.

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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned. 

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