FTSE 350 Review: There are only a handful of transport stocks worth owning

The companies that fall into the transport sector navigate water, road and rail, carrying everything from people to parcels. But even businesses that do similar things are performing very differently.

As people flock back onto public transport, for example, train and bus operator FirstGroup (FGP) is enjoying excellent profit and revenue growth. By contrast, Mobico (MCG), formerly National Express, is struggling under a mountain of debt and costs, and is considering selling off its US business to bolster its balance sheet. 

The two public transport groups illustrate a useful point, however: improving demand is not enough to save all transport companies. 

International Distributions Services (IDS), the parent company of Royal Mail, is learning this the hard way. Parcel volumes and revenues were much higher than analysts anticipated in the run-up to Christmas – but so were costs. As such, the group only expects to break even this year. It remains unclear how the courier can make the necessary savings without a big regulatory shake-up, freeing it from the bonds of the universal service obligation. A consultation paper published by Ofcom in January may have paved the way for just that.

Far away from railway stations and parcel depots, ship broker Clarkson (CKN) is navigating stormy waters with greater skill. The group has increased its dividend for 20 years in a row and shows no sign of stopping, having just upgraded its 2023 profit forecast. It also looks set to benefit from disruption in the Red Sea and Suez canal, as well as low water levels in the Panama Canal, as longer journeys will increase demand for ships.

Clarkson remains highly sensitive to supply and demand dynamics, however, and some commentators are warning that softer demand and a big increase in capacity could be a “car crash” for the container shipping industry. As other companies deal with internal issues, therefore, Clarkson has its eyes fixed warily on the horizon.