3 Transportation Stocks Gear Up for Q4 Beat
The global markets tumbled earlier this week on a weak
manufacturing sector report from ISM and poor Chinese economic
data. But data on Markit's Eurozone Composite Purchasing Managers'
Index and a positive expectation from the U.S. job report has once
again set the markets rolling. A decline in the U.S. unemployment
insurance application and claims for U.S. state unemployment
benefits definitely have a positive bearing on the U.S. markets. In
addition, the global markets also look strong with Asian and
European indices showing recoveries from their recent
We expect the ongoing fourth quarter earnings season to benefit
from this broader optimism. The Transportation sector, which has
already shown outperformance so far, remains one of our favorites,
with expected strong results by some of its stocks. Not only do we
see the current macroeconomic momentum working in favor of these
stocks, but also find continued improvement in industry
fundamentals benefiting them.
Earnings Picture Looks Bright
Around 90.9% of the companies in the transportation sector have
reported their fourth quarter results so far with most registering
positive earnings surprise. The sector's year-over-year earnings
growth so far has been 16.2%, up from 13.2% in the prior
Improved airline profitability on growing air travel demand,
disciplined capacity and many new and enhanced ancillary revenue
streams lent most of the support to the quarter's growth. Better
numbers from freight railroad carriers and other logistic companies
on favorable market fundamentals, robust demand and high shipping
rates contributed no less.
The backdrop looks perfect to zero-in on a handful of sector stocks
that seem confident of beating earnings estimates in their upcoming
announcement. An earnings surprise should also help these stocks
outperform in the near term.
An Easy Way to Find the Best Stocks
Stock diversity in the Business Services arena could muddle up your
picking power. An easy way to narrow down the list for your
portfolio is to take a look at stocks with solid Zacks Rank and
Earnings ESP is our proprietary methodology for determining stocks
having high chances of surprising with their next earnings
announcement. The Earnings ESP shows the percentage difference
between the Most Accurate estimate and the Zacks Consensus
The combination of a favorable Zacks Rank - Zacks Rank #1 (Strong
Buy) or 2 (Buy) or 3 (Hold) - and a positive earnings ESP, is
usually a harbinger of earnings beat and formula for success in
this risk-ridden macro economy.
For investors seeking to benefit by applying this strategy to their
portfolio, we have chosen three transportation stocks that hold
significant upward potential this earnings season.
Copa Holdings SA
Panama-based, Copa Holdings SA provides passenger and cargo airline
services through its operating subsidiaries Copa Airlines and Copa
Airlines Colombia. The carrier has strategic alliances with
United Continental Holdings, Inc.
(UAL) and serves 66 destinations across 29 countries in North,
Central and South America and the Caribbean. The carrier boasts one
of the youngest fleet of 90 aircraft that comprise 64 Boeing 737NG
and 26 EMBRAER-190s.
The Zacks Consensus Estimate for Copa Holdings' fourth quarter
earnings is pegged at $2.53, representing a robust 25.9%
year-over-year growth. The company registered an average positive
earnings surprise of 4.5% over the trailing four quarters.
The company presently carries a Zacks Rank #2 and has an earnings
ESP of +3.95%. Copa Holdings is set to report its fourth quarter
results on Feb 12, after the market closes.
Spirit Airlines, Inc.
Headquartered in Miramar, Florida, Spirit Airlines operates as a
low cost airline covering 50 destinations in the U.S., Latin
America and Caribbean. As of Sep 30, 2013, the company operated 250
daily flights and had a fleet of 51 aircraft with 29 Airbus A319,
20 A320, and two A321.
Currently, the Zacks Consensus Estimate for Spirit Airlines' fourth
quarter earnings is 46 cents with growth expectation of 68.9% from
the prior-year quarter. The company boasts an average positive
earnings surprise of 11.4% over the trailing four quarters.
Spirit Airlines currently holds a Zacks Rank #2 and has an earnings
ESP of +2.17%. The carrier is slated to report its fourth quarter
financial results on Feb 19, before the market opens.
Trinity Industries Inc.
Initially established as Trinity Steel, Trinity Industries Inc. is
a U.S. based conglomerate, which offer a variety of services and
operates primarily through five business segments. These are
namely, Rail Group, Construction Products Group, Construction
Products Group, Energy Equipment Group, and Railcar Leasing and
Management Services Group.
The Zacks Consensus Estimate for Trinity Industries' fourth quarter
earnings is $1.41. This represents an earnings growth of 56.8% on a
year-over-year basis. The company delivered average positive
earnings surprise of 10.8% over the trailing four quarters.
Trinity Industries has an earnings ESP of +2.13% and carries a
Zacks Rank #1. The company will report its earnings on Feb
19, after the market closes.
We expect the positive wave in the transportation industry to
continue and uplift the stock prices of the sector participants. So
this is the right time to invest in the potential winners of the
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COPA HLDGS SA-A (CPA): Free Stock Analysis
SPIRIT AIRLINES (SAVE): Free Stock Analysis
TRINITY INDS IN (TRN): Free Stock Analysis
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