Inside Wall Street
Get a Lift on These Carriers
Investment pro Joseph Battipaglia is as bullish as ever: Last October, when the Dow Jones industrial average dropped to 7400, after hitting 9000 in June, he was forecasting 9500 by the start of 1999. Now, with the Dow at 10,800, the chairman of investment policy at Gruntal & Co. still thinks this bull market is far from finished. He predicts the Dow will shoot to between 11,500 to 12,000 by yearend. Big-cap stocks, led by technology issues, he says, will continue powering the advance. But he also sees a cyclical play in the picture.
"If you believe that foreign economies--Asia and Latin America in particular--are on their way back, large transport stocks would be the best bets among the cyclicals," argues Battipaglia. As these economies rev up, he says, U.S. transport companies will get a boost from the increase in goods and passenger traffic. In particular, he thinks Airborne Freight (ABF), Northwest Airlines (NWAC), and Union Pacific (UNP) will be among the winners. As demand for U.S. exports rises from the rebounding economies, they will be major beneficiaries. "It's a great way to leverage the pickup in overseas business," he says.
Airborne, the nation's No. 3 integrated express carrier (it has its own planes and trucks), derives about 15% of its revenues overseas. As a low-cost, entrepreneurial carrier, Airborne is positioned to seize opportunities fast, says Battipaglia. Gruntal analyst Steve Lewins figures Airborne will earn $3.20 a share in 1999 and $3.50 next year.
Northwest, the country's fourth-largest airline, derives about 30% of its business from Asia. And its 51% stake in Continental Airlines opens up Latin America to Northwest, says Lewins, who expects it will earn $2.50 a share in 1999 and $3.40 in 2000.
Union Pacific, the largest U.S. railroad, with 35,000 miles of track in the West, serves as the gateway to the Pacific Rim, notes Battipaglia. Cargo traffic, robust as compared with a depressed 1998, prompted Lewins to up his 1999 earnings estimate from $2.40 to $2.70 and next year's from $3 to $3.50.BY GENE G. MARCIALReturn to top
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