Dow transports are on a roll. Why investors shouldn't ignore the bullish message.

By Philip van Doorn and Tomi Kilgore

As Dow transports have rallied - which the Dow Theory says is a good sign for the stock market - most of the components remain cheaply priced

Uber is expected to increase its revenue at a compound annual rate of 15.2% from 2025 through 2027, according to consensus estimates among analysts polled by LSEG. This is more than double the growth rate projected for the S&P 500.

There's an often neglected part of the stock market sending a pretty bullish signal, and history suggests investors would be wise not to ignore it.

The Dow Jones Transportation Average DJT is only 20 stocks, and the market capitalization of the largest component, Uber Technologies (UBER), was just $191.5 billion in Monday trading - or about 4.3% the size of the S&P 500 index's SPX biggest member, Nvidia (NVDA), which was at $4.43 trillion.

But based on the Dow Theory of market analysis, which has remained relevant on Wall Street for more than a century, the transport tracker is one of the two indexes investors should focus on, with the other being the 30-member Dow Jones Industrial Average DJIA.

And the Dow transports have been on a roll. While the index slipped 0.3% on Monday, that's after it closed Friday at a one-year high and after a 10-session winning streak - the longest such streak since an 11-day stretch that ended Aug. 12, 2020. For those looking to take part in these stocks' recent resurgence, there's a MarketWatch analysis of the valuation and growth outlook for each component in a table below.

While the composition of the Dow Jones Transportation Average has changed dramatically over the decades - it was primarily a railroad index when the Dow Theory started - the idea behind its importance, and that of the Dow industrials at large, remains the same: The transports take what the industrials make. Basically, a bull market can't be confirmed unless both indexes are trending higher.

The transports are no longer made up of just movers of things that are made, and the industrials certainly are no longer just makers, but they still represent key sectors of the economy. And if they aren't moving in sync, then something is wrong with the economy - and it's tough for a bull market to be sustained without economic growth as fuel.

One caveat to the current bull market has been that although the Dow industrials closed at a record high of 48,254.82 as recently as Nov. 12, and are currently a little over 1% off that level, the Dow transports haven't closed at a record since Nov. 25, 2024, at 17,754.38. The transports closed Monday 3.5% off that high.

Despite the underperformance, it's not like the Dow transports have been trending lower; they just haven't recovered from the selloff resulting from President Trump's "liberation day" tariffs announcement in April as fast as the Dow industrials have. But that seems to be changing, and it's a good sign for the market.

Prior to the latest win streak, the Dow transports had five streaks of at least nine straight gains over the past 25 years. After four of them, there was a brief pause, or a cooling-off period with little movement, before the index, and the broader stock market, made a higher high.

After the nine-day win streak that ended Jan. 12, 2018, the transports index rose to a higher high over the next couple of weeks, but then it entered a correction - although not a bear market - that took the index down more than 11% in about two months. Seven months later, it was back at a record high.

Most of the transports are cheaply priced

Besides what the Dow transports could mean for the broader stock market, what about the individual stocks within the index? Should investors be interested in this group of 20 stocks now?

One reason to take a closer look at the individual companies is that most of them are cheaply priced relative to expected earnings per share.

The S&P 500 trades at a forward price-to-earnings multiple of 22.5. This is the index components' share prices divided by consensus 12-month earnings-per-share estimates among analysts polled by LSEG, and weighted by the companies' market capitalizations. The S&P 500's current P/E of 22.5 represents a 12% premium to its average five-year forward P/E of 20.1, and a 20% premium to its average 10-year forward P/E of 18.8.

Here are current forward P/E multiples for all 20 stocks in the Dow Jones Transportation Average, along with projected sales and earnings-per-share compound annual growth rates (CAGR) from calendar 2025 through 2027. The projections are based on consensus estimates among analysts polled by LSEG. The companies are listed alphabetically within the six industry groups represented in the index.

   Company                                    Forward P/E multiple  2-year estimated sales CAGR through 2027  2-year estimated EPS CAGR through 2027Industry 
   Alaska Air Group                                            9.0                                      6.9%                                   94.1%Airlines 
   American Airlines Group                                     7.6                                      5.7%                                   93.5%Airlines 
   Delta Air Lines                                             9.3                                      5.4%                                   16.0%Airlines 
   Southwest Airlines                                         14.8                                      6.4%                                   83.6%Airlines 
   United Airlines Holdings                                    8.2                                      7.0%                                   17.1%Airlines 
   Expeditors International of Washington                     25.2                                      0.8%                                    4.6%Courier 
   FedEx                                                      13.9                                      4.1%                                   11.0%Courier 
   United Parcel Service                                      13.5                                      1.7%                                    7.3%Courier 
   CH Robinson Worldwide                                      26.1                                      5.2%                                   16.8%Ground Freight 
   CSX                                                        19.2                                      4.4%                                   13.4%Ground Freight 
   J.B. Hunt Transport Services                               26.8                                      5.0%                                   18.4%Ground Freight 
   Landstar System                                            26.4                                      7.2%                                   25.3%Ground Freight 
   Norfolk Southern                                           22.6                                      3.9%                                    9.5%Ground Freight 
   Old Dominion Freight Line                                  29.3                                      6.0%                                   12.6%Ground Freight 
   Ryder System                                               12.5                                      4.2%                                   15.0%Ground Freight 
   Union Pacific                                              18.6                                      4.3%                                    8.1%Ground Freight 
   Kirby                                                      15.8                                      6.5%                                   10.3%Marine Freight 
   Matson                                                     11.0                                      2.4%                                   -6.0%Marine Freight 
   Uber Technologies                                          25.6                                     15.2%                                   -7.2%Online Services 
   Avis Budget Group                                          16.0                                      1.9%                                   22.4%Passenger Transportation 
   S&P 500 Industrials                                        23.6                                      6.4%                                   11.0% 
   S&P 500                                                    22.5                                      7.1%                                   14.3% 
                                                                                                                                                                  Source: LSEG 

For comparison, growth projections are included at the bottom of the list for the S&P 500's industrials sector and the full S&P 500. (We have shortened some of the industry-group names in the right-most column to make them fit better on the table.)

Among the 20 transportation companies, 13 trade at forward P/E ratios lower than that of the S&P 500, and five of them - including four of the five airlines and Matson (MATX) - trade at forward P/E ratios less than half that of the S&P 500.

The airlines' projected revenue CAGRs make for mixed comparisons with those of the S&P 500's industrials sector and the full S&P 500; however, the group's earnings are expected to soar over the next two years. If those EPS growth projections are anywhere near accurate, a long period of positive comparisons for the airlines' quarterly financial results might have the effect of boosting this group's forward P/E ratios.

Uber stands out as the only company on the list with a double-digit sales CAGR projection from 2025 through 2027. However, as the company continues to expand and adopt new technology, it is expected to become less profitable. Then again, Uber is a long-term play on new technology, and the stock's forward P/E multiple of 25.6 isn't very high for a company expected to grow its top line so quickly. Last week, analysts at Citigroup included Uber in their recommended list of 10 stocks of rapidly growing AI companies.

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12-09-25 0715ET