Transport ETFs Rally on Solid Start to Earnings Season

The transportation sector has been off to a strong start this earnings season. Most industry players managed to beat on earnings or revenues or on both counts, instilling huge optimism in the space (see: all the Industrials ETFs here).

For a better understanding, let’s delve into the results of some well-known industry players:

Transportation Earnings in Focus

The world's largest package delivery company United Parcel Service’s UPS top and the bottom line beat the Zacks Consensus Estimate. Earnings of $2.07 were a penny ahead of the consensus mark while revenues of $18.32 billion edged past the estimated $18.3 billion. For 2019, the company reiterated earnings per share in the range of $7.45-$7.75.

Union Pacific UNP missed the Zacks Consensus Estimate for earnings by 7 cents and that for revenues by $107 million. Meanwhile, Kansas City Southern’s KSU earnings of $1.94 per share topped estimates by 17 cents while revenues of $748 million came ahead of the estimated $730 million.

U.S. airlines Delta Air Lines DAL and United Continental UAL beat on earnings but lagged on revenues. Earnings per share at Delta and United Continental trumped the Zacks Consensus Estimate by 5 cents and 13 cents, respectively. Revenues of $12.56 billion for Delta and $11.4 billion for United Continental were below the estimated $12.62 billion and $11.42 billion, respectively (read: 4 Sector ETFs & Stocks to Bet on Ahead of Q3 Earnings).

Delta projects weaker-than-expected earnings per share for the ongoing quarter, forecasting EPS of $1.20-$1.50. The midpoint is much lower than the Zacks Consensus Estimate of $1.50. United Continental raised its full-year earnings guidance from $10.5-$12 to $11.25-$12.25. The mid-point of the new range was below the Zacks Consensus Estimate of $11.81.
    
Last but not the least, leading trucking carrier J.B. Hunt JBHT missed on earnings by 4 cents per share while revenues of $2.36 billion topped the consensus estimate of $2.34 billion.

ETFs in Focus

Solid results have led to smooth trading in transportation ETFs over the past week. iShares Transportation Average ETF IYT, SPDR S&P Transportation ETF XTN and First Trust Nasdaq Transportation ETF FTXR all gained more than 3% in the same time frame. However, all these ETFs have a Zacks ETF Rank #4 (Sell).

IYT

The fund tracks the Dow Jones Transportation Average Index, giving investors exposure to a small basket of 20 securities. The in-focus six firms make up for a combined 39.6% share. From a sector perspective, railroads, and air freight & logistics take the largest share with 32.6% and 24.6% share, respectively, while airlines and trucking round off the next two spots with double-digit exposure each. The fund has accumulated nearly $516.5 million in AUM and sees solid trading volume of around 228,000 shares a day. It charges 42 bps in annual fees (read: FedEx Disappoints: Transport ETFs in Focus).

XTN

This fund tracks the S&P Transportation Select Industry Index holding 44 stocks in its basket. The in-focus firms account for no more than 3% share each. Further, about 36.3% of the portfolio is dominated by trucking while airlines takes around one-fourth share. With AUM of $126 million, the fund charges 35 bps in fees per year from investors and trades in a lower volume of around 12,000 shares a day.

FTXR

This fund offers exposure to the 30 most-liquid U.S. transportation securities based on volatility, value and growth by tracking the Nasdaq US Smart Transportation Index. The in-focus six firms represent a combined 35.2% share. Ground freight & logistics takes the top spot at 30.4% while airlines, auto & truck manufacturers as well as auto, truck & motorcycle parts round off the next three. FTXR has accumulated $2.4 million in its asset base and charges 60 bps in annual fees. Average trading volume amounts to meager 4,000 shares.

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United Airlines Holdings Inc (UAL) : Free Stock Analysis Report
 
Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
 
Union Pacific Corporation (UNP) : Free Stock Analysis Report
 
Kansas City Southern (KSU) : Free Stock Analysis Report
 
J.B. Hunt Transport Services, Inc. (JBHT) : Free Stock Analysis Report
 
iShares Transportation Average ETF (IYT): ETF Research Reports
 
SPDR S&P Transportation ETF (XTN): ETF Research Reports
 
United Parcel Service, Inc. (UPS) : Free Stock Analysis Report
 
First Trust NASDAQ Transportation ETF (FTXR): ETF Research Reports
 
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