Goodbye to wandering at the bottom? Damo raised its 2026 freight outlook until “attractive” Knight-Swift Transportation (KNX.US) remains the preferred stock

The Zhitong Finance App learned that Morgan Stanley raised the outlook for the cargo transportation industry to “attractive” in 2026. The bank's analyst Ravi Shanker and his team believe that even though the outlook for the industry isn't entirely clear, the industry's current risk-reward situation is the best since 2020.

Analysts pointed out that since the downturn in inventory removal cycle clearly ended in mid-2024, the demand side has been in an unprecedented state, hovering at the bottom while waiting for one specific catalyst after another (interest rate cuts, US elections, clear tariff policies, etc.), and there has been no continuous recovery.

Analysts detailed the specific sections. Regarding the trucking industry, the analyst said, “In our bear market scenario, the trucking industry in 2026 is very similar to 2025. However, in our bull market scenario, the stock price may have room to rise by more than 50%. 2026 will also be a decisive year for autonomous trucks as companies seek to expand their pilot fleets and prepare for a commercial launch in 2027.”

Regarding the railway industry, analysts said, “The focus of the rail industry in 2026 will focus on how the merger and acquisition story of United Pacific (UNP.US) -Norfolk Southern (NSC.US) and possibly other companies unfold. However, if fundamental performance still fails to keep up with the trucking industry in the upward cycle, enthusiasm for mergers and acquisitions may decline as well. We expect the rail industry to show low single-digit percentage volume growth and low single-digit rate growth in 2026, and continue to prefer Canadian Railways over American Railways.”

For the logistics/third-party logistics industry, the analyst said: “2026 could be a transformative year for brokers. As some stocks begin to reflect the 'AI conceptual halo', we will have the ultimate answer about how real, diverse, sustainable, and extrapolable are technological improvements. Similarly, how AI-enabled brokers will cope with the upward cycle, whether they can maintain market share in competition with asset-based carriers, and whether they can actually reflect operating leverage (which is itself a paradoxical concept for an asset-light model) will determine whether they can maintain (selective) re-ratings.”

For the package delivery industry, analysts said, “2026 may also be a critical year for package delivery companies, as their major costs/restructuring plans are coming to an end, and we will also have a better understanding of where the level of normalized earnings per share (EPS) lies. Structural changes in the e-commerce market may also continue, and rural distribution and returns will become a new competitive front.”

In terms of individual stock recommendations, Morgan Stanley adjusted the ratings of the Canadian Pacific Kansas City Railway (CP.US) and Old Dominion Freight Line (ODFL.US) from “equal to the general market” to “increased holdings.” Knight-Swift Transportation (KNX.US) is still Morgan Stanley's highest ranked stock in the cargo transportation industry in 2026, but since then the rankings have changed to GXO Logistics (GXO.US) and Ryder (R.US), while Canadian National Railways (CNI.US) and Pacific Kansas City, Canada entered the top five.