The big story of the past two weeks has been increased volatility. In the wake of President Trump’s will he/won’t he tariff policy, markets have swung down and partway back up – and investors are worried that a trade war may push us over the tipping point and into a recession.
Morgan Stanley strategist Mike Wilson is taking measure of the market volatility, and is betting on two sectors that can weather the storm.
“On the positive side, the 90-day pause on reciprocal tariffs and further concessions over the weekend lessen the near-term probability of a recession,” Wilson said. “Perhaps most importantly, they demonstrate that the administration is willing to course adjust — an unknown dynamic for stocks just 1 week ago. On the negative side, the back and forth on policy is still likely to exacerbate uncertainty for businesses and consumers… We would recommend looking for single stock opportunities in industries where the set-up is more derisked — Transports, Materials.”
Wilson’s colleagues among the Morgan Stanley stock analysts are doing just that – picking out single stocks in the Transport and Materials sectors. Using the TipRanks platform, we’ve looked up the broader Wall Street view on two of their choices; here are the details, and the Morgan Stanley comments.
Schneider National (SNDR)
We’ll start in the Transport sector, with Schneider National, a $3.9 billion leader in the North American logistics and transport fields. Schneider has its base in Green Bay, Wisconsin, and offers its customers a full range of logistic services. These include truckload and intermodal surface transport, for a wide range of routes, on regional, long-haul, expedited, and dedicated runs. The company also handles intermodal and cross-dock loads, and works with transport brokers as well as contract customers. In short, Schneider is a full-service trucking company.
While Schneider got its start in the US, and is one of the largest transport firms on the US roads, the company also has an international presence. Schneider operates routes in Canada and Mexico, giving it access to most of North America’s markets. And, the company was the first US transport/logistic firm to open operations in China.
Schneider is always looking to expand its operations, and in November of last year took an important step in that direction with the acquisition of Baltimore-based Cowan Systems. Cowan operates a fleet of 1,800 trucks and 7,500 trailers in the Eastern and Mid-Atlantic regions, with nodes at more than forty locations, a network that is now added to Schneider’s existing services. Schneider paid $390 million in cash to acquire Cowan, and also agreed to acquire certain other of Cowan’s real estate assets for an additional $31 million.
Turning to Schneider’s financial results, we find that the company last reported earnings for 4Q24. In that quarter, the company had a top line of $1.34 billion, down 2.2% year-over-year and missing the forecast by $20 million. The company’s bottom line, an EPS of 20 cents by non-GAAP measures, matched expectations – and it was up 4 cents per share compared to the prior-year period. We should note that, even after the Cowan acquisition, the company finished 2024 with cash and liquid asset reserves of $117.6 million.
Schneider is a major player in the transport sector, and its firm position in the field caught the attention of Morgan Stanley’s Ravi Shanker, who writes, “We see SNDR as well positioned to benefit from a truckload share gains, structural supply tightening, IMC gains, the secret sauce of the Quest system, and technology leadership taking advantage of secular gains from intelligent trucks. SNDR’s diversification should make them a strong beneficiary of the upcycle and LT margin targets should push normalized EPS above $2 though mgmt. will need to execute well and consistently to get there.”
Shanker goes on to rate SNDR shares as Overweight (i.e., Buy), with a $40 price target that implies a gain of 80% on the one-year time horizon. (To watch Shanker’s track record, click here)
Overall, SNDR stock gets a Moderate Buy consensus rating from the Street’s analysts, based on 13 recent reviews that include 4 to Buy and 9 to Hold. The shares are priced at $22.20 and their $27.54 average target price indicates room for a one-year share appreciation of 24%. (See SNDR stock forecast)
Martin Marietta Materials (MLM)
For the second stock on our list, we’ll look at Martin Marietta Materials, a $30 billion materials sector giant – and a business descendant of one of America’s legendary industrial names. The company can trace its origins to the 1930s and the aviation industry, in the Lockheed Martin company. Today’s Martin Marietta Materials spun off from Lockheed Martin in 1996, and focuses on the aggregate materials business, producing, storing, and distributing a wide range of aggregates for the construction industry. Martin Marietta Materials’ products are widely used by both commercial and residential builders, and the company is the third largest in the US aggregate materials sector.
The scale of Martin Marietta Materials’ business can be seen in the company’s network of facilities, and in its product list. The company operates more than 500 facilities, spread across 28 states, as well as Canada and the Bahamas. These facilities produce everything from aggregate materials to ready mix cement to asphalt to magnesia, all vital products in high demand from the construction industry. The company has storage facilities, and also operates transport assets to move the aggregates and other products.
On the financial side, Martin Marietta Materials reported quarterly revenues of $1.63 billion in 4Q24, for a modest year-over-year gain of 1.2% and missing the estimates by $20 million. The company’s bottom line came to $4.79, up 16 cents per share year-over-year – and it was 15 cents per share higher than had been anticipated. We should note here that Martin Marietta Materials is a strong cash generator, and in both 2023 and 2024 realized ‘cash provided from operating activities’ of $1.5 billion. The company had cash and liquid assets totaling $670 million at the end of 2024, along with $1.2 billion in available credit.
Looking ahead to 2025, the company expects that aggregates shipping growth will increase 4% over the year, and that pricing growth will reach 6.5% at the midpoint of its range.
Morgan Stanley analyst Angel Castillo covers this industrial/construction stalwart, and following an NDR, he came away impressed by the company’s sound fundamentals and ability to execute on mergers and acquisitions.
“End market strength, pricing potential, and other key takeaways from NDR bolster our conviction that Aggregates and Martin Marietta remain an attractive and differentiated investment opportunity and thus our preferred way of getting exposure to the US construction market,” Castillo opined. “MLM’s capital allocation framework remains consistent with prior commentary as M&A remains the top priority given (1) strong FCF; (2) synergy potential; (3) significant bolt-on and platform acquisition opportunities; and (4) MLM’s track record of execution and integration. In particular, the company emphasized that it believes M&A remains the most effective use of their first dollar.”
For Castillo, all of this adds up to an Overweight (i.e., Buy) rating, and he complements that with a price target of $622, suggesting a 12-month upside potential of 25%. (To watch Castillo’s track record, click here)
This stock has picked up 13 recent share reviews, breaking down to 10 Buys and 3 Holds for a Strong Buy consensus rating. The stock is currently priced at $499.05 and its $595.08 average price target implies that a gain of 19% lies ahead. (See MLM stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.