3 Transportation Stocks to Top Earnings
The year 2014 put the transportation stocks on a choppy track,
as harsh winter conditions took its toll on most of the freight
transportation companies. Operational efficiencies scaled down,
while costs shot up, leading some major railroads to lower their
bottom-line expectations for 2014.
However, expectation of improved U.S. economic growth in the
coming quarters and beyond is a net positive for this economically
sensitive sector. We remain optimistic as the transportation sector
is witnessing a gradual recovery. Further, the upsurge in
petrochemical shipments has also uplifted market conditions within
this industry, leading to overall earnings improvement.
Earnings So Far
In the now-being-reported Q1 earnings season, 97.7% of the
sector participants have reported results so far, with total
earnings up 6.5% year over year on 3.4% higher revenues. This
represents a better performance compared to the S&P 500.
However, the seasonal impact brought down operating results of
these companies from what we observed in the fourth quarter of 2013
and the trailing 4-quarter average.
Nevertheless, we remain positive on the sector given better
numbers from freight carriers and other logistic companies on
favorable market fundamentals, recovering market demand on key
product shipments, and high shipping rates.
Although, we are at the tail end of the Q1 earnings season, the
backdrop looks perfect to zero in on a handful of transportation
stocks that seem confident of beating earnings estimates in their
upcoming announcements. An earnings surprise should also help these
stocks outperform in the near term.
How to Find the Right Stocks?
Stock diversity in the transportation arena could muddle up your
picking power. An easy way to narrow down choices is to take a look
at stocks with a solid Zacks Rank and a favorable Earnings ESP.
Earnings ESP is our proprietary methodology for determining
stocks that have high chances of surprising with their next
earnings announcements. Earnings ESP shows the percentage
difference between the Most Accurate estimate and the Zacks
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 a near-sure formula for
success in this risk-ridden macro economy.
For investors seeking to benefit by applying this strategy to
their portfolio, we present three transportation stocks that have
the right combination of elements to beat earnings.
Ship Finance International Limited
Ship Finance International Limited is a major shipping liner,
which owns and operates vessels primarily in Bermuda, Cyprus,
Malta, Liberia, Norway, Singapore, the United Kingdom, and the
Marshall Islands. As of Mar 2014, the company had one of the
world's largest fleet comprising 73 vessels.
Currently, the Zacks Consensus Estimate for Ship Finance
International's first-quarter earnings is 31 cents with growth
expectation of 80.39% over the prior-year quarter. The company had
recorded a positive earnings surprise of 10.53% in the last
Ship Finance International currently holds a Zacks Rank #3 and
has an earnings ESP of +35.48%.
--The carrier is slated to report its first-quarter financial
results on May 29.
Headquartered in Bermuda, Teekay Corp. is a shipping company
involved in marine transportation services for crude oil and gas.
The company serves internationally and owns approximately 170
liquefied gas, offshore and conventional tanker assets.
The Zacks Consensus Estimate for Teekay Corp.'s first-quarter
loss is 14 cents, representing an improvement of 18.63% year over
year. The company had delivered a positive earnings surprise of
200% in the last reported quarter.
Teekay Corp. presently carries a Zacks Rank #3 and has an
earnings ESP of +378.57%.
--The company will report its earnings on May 15, before market
Teekay Tankers Ltd.
Established in 2007, Teekay Tankers is a wholly owned subsidiary
of Teekay Corporation. The company is engaged in marine shipping,
particularly for crude oil and refined petroleum
The Zacks Consensus Estimate for Teekay Tankers' first-quarter
earnings is pegged at 10 cents, representing robust 350%
year-over-year growth. The company had registered a positive
earnings surprise of 25% in the last quarter.
Teekay Tankers presently carries a Zacks Rank #3 and has an
earnings ESP of +20.00%.
--The company is set to report its first-quarter results on May
15, before market opens.
The transportation sector is trying to recover from its lull
with palpable improvements in the fundamentals of shipping and
logistic companies. With an improving economy, the transportation
sector will show solid gains.
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SHIP FIN INTL (SFL): Free Stock Analysis Report
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