The Dow Jones transportation average gained 0.6 percent on Thursday after hitting a new multi-year high dating back to March 2015.
Transportation companies are riding the tailwinds from corporate tax reform since they're the highest taxpayers in industrials, says Amit Mehrotra, a research analyst at Deutsche Bank. A corporate tax cut for these companies would result in an increase of billions of dollars in earnings and a $100 billion increase in equity value, he noted.
Expected spending on infrastructure should also drive demand for the industry, he added. All three Class 1 rail companies (CSX, Union Pacific and Norfolk Southern) struck a cautiously optimistic tone Wednesday on guidance, volume and expanding margins, providing some evidence that the demand side of the transportation industry is improving, Mehrotra added.
"In a world where global investors are asking, 'Which companies should I invest in that are going to make America great again?' transportation fits perfectly in that little box," Mehrotra said.
On the data front, the U.S. manufacturing index for November hit 53.2 on Thursday, beating consensus estimates of 52.2.
DJ Transportation Average 3-month chart
The index was still about a notch below its all-time intraday high of 9,310.22 from Nov. 28, 2014.