What Is the Transportation Sector?

What Is the Transportation Sector?

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.

KEY TAKEAWAYS

  • The transportation sector is an important industry sector in the economy that deals with the movement of people and products.
  • These include companies such as airlines, trucking, railroads, shipping, and logistics firms, as well as those that provide transportation infrastructure.
  • The Dow Jones Transportation Index (DJTA) was the U.S.’s first stock market index, and still tracks 20 of the most important companies in the sector.

Understanding the Transportation Sector

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. A very real recent example of the effect of costs driving the price of transportation industry stock is the effect of the last few years’ low fuel prices helping to boost the value of airline stocks. Airline companies’ costs have been reduced by the low fuel prices, increasing profit margins and helping to put upward pressure the price of airline company stock.

Leave a Reply