Saying goodbye to the bottom? Morgan Stanley raises 2026 freight industry outlook to "attractive" Knight-Swift Transportation (KNX.US) remains the top stock choice.

Morgan Stanley has upgraded its outlook for the freight transportation industry in 2026 to "attractive." Analyst Ravi Shanker and his team believe that the risk-return situation in the industry is the best since 2020, even though the outlook is not completely clear. The analyst pointed out that demand has been unprecedented since the clear end of the inventory de-stocking cycle in mid-2024, with the industry waiting for specific catalysts (rate cuts, US elections, clarity on tariff policies, etc.) to hover at the bottom, without seeing sustained recovery. The analyst provided detailed explanations for specific sectors. For the trucking transportation industry, the analyst said, "In our bear scenario, the trucking transportation industry in 2026 is very similar to 2025. But in our bull scenario, stock prices could have an upside potential of over 50%. 2026 will also be a decisive year for autonomous trucking, as companies will seek to expand pilot fleets and prepare for commercial launches in 2027." For the railroad industry, the analyst said, "The focus of the railroad industry in 2026 will revolve around the merger stories of Union Pacific (UNP.US) - Norfolk Southern (NSC.US) and possibly other companies. However, if the fundamentals still lag behind the trucking transportation industry in the upcycle, the enthusiasm for mergers may also decline. We expect the railroad industry in 2026 to see low single-digit percentage volume growth and continue to prefer Canadian rail companies over US rail companies." For the logistics/third-party logistics industry, the analyst said, "2026 may be a transformative year for brokers. As some stocks begin to reflect the 'AI concept halo,' we will get the final answer on how real, differentiable, sustainable, and scalable technological improvements are. Similarly, how AI-enabled brokers will respond to the upcycle, whether they can maintain market share in the competitive asset carrier market, and whether they can truly demonstrate operational leverage (which is contradictory for asset-light models in itself) will determine their ability to sustain (selective) revaluation." For the parcel delivery industry, the analyst said, "2026 may also be a critical year for parcel delivery companies as their major cost/restructuring plans enter the final stages, and we will have a clearer understanding of where normalised earnings per share (EPS) levels stand. Structural changes in the e-commerce market may continue, with rural delivery and returns becoming new competitive frontiers." In terms of stock recommendations, Morgan Stanley has upgraded its ratings for Canadian Pacific Railway (CP.US) and Old Dominion Freight Line (ODFL.US) from "equal to market" to "buy." Knight-Swift Transportation (KNX.US) remains the top-ranked stock in Morgan Stanley's 2026 freight transportation industry, followed by GXO Logistics (GXO.US) and Ryder (R.US), with Canadian National Railway Company (CNI.US) and Canadian Pacific Railway entering the top five.