U.S. and Canada freight transportation & logistics outlook neutral for 2025

Fitch Ratings-New York-13 December 2024: The sector outlook for U.S. & Canadian freight transportation & logistics (T&L) is neutral, according to Fitch Ratings.

Fitch expects a slowly improving freight cycle to begin in 2025. The sector, covering freight operators like rail, trucking, freight brokerage and logistics services, will benefit from a recovering freight cycle after a challenging period from mid-2022 to mid-2024. Operating conditions are improving from consistent economic growth, including positive growth in retail shipments and slow growth in industrial end markets where verticals are currently mixed, and a better balance of industry capacity in trucking markets. Pricing growth and steady cost structures are expected to support improving margins.

Rating Outlooks across the sector are broadly Stable, reflecting the sector’s cyclicality and Fitch’s through-the-cycle approach to ratings. Key distinguishing factors between investment grade and high-yield issuers include competitive position strength, financial flexibility and leverage profile. Various high-yield companies will likely focus on integrating large acquisitions or asset purchases in 2025.

U.S. trade relationships could affect the sector, and risks to the sector outlook include an aggressive tariff policy which would lead to a down-shift in macroeconomic conditions, the resumption of a high inflationary environment, and the absence of a positive inflection in truckload rates in 2025. The trend of nearshoring and onshoring production capacity in the U.S. and across North America can create greater domestic freight flows over the medium term.