Despite the fact that harsh weather had restricted the movement
of people and goods by road, air or ship last quarter, most of the
transportation companies have either easily managed to meet or beat
the Zacks Consensus Estimate on the earnings front. This suggests
strong confidence in the recovering U.S. economy and continued
strength in the sector.
Earnings from some companies such as Union Pacific (
), Kansas City Southern (
), Ryder Systems (
), Delta Air Lines (
) and United Continental (
), in particular have been inspiring. However, lackluster
performance by J.B. Hunt (
) and United Parcel Service (
) were the dampeners.
iShares Dow Jones Transportation Average Fund (
surged to an all-time high of $139.45 on April 24 while
SPDR S&P Transportation ETF (
is close to its record high of $88.63 reached in early April. Both
funds are crushing the broad blue-chip (
) and broad sector (
) funds by wide margins over the past 10 days.
Both the products have solid Zacks ETF Rank of 2 or 'Buy',
suggesting that their outperformance would continue in the coming
months as well (read:
4 ETFs Riding High in Q2
Transportation Earnings in Focus
, the U.S. largest railroad, reported earnings of $2.38 per share
matching the Zacks Consensus Estimate but 17% higher than the
year-ago earnings. Revenues of $5.6 billion climbed 7% year over
year but missed the Zacks Consensus Estimate of $5.7 billion.
Robust year-over-year performance is credited to higher volume and
increased coal shipments.
Another major railroad,
, posted strong earnings of $1.05 per share comfortably beating the
Zacks Consensus Estimate by 7 cents and improving from the year-ago
earnings by 16 cents. This is primarily owing to higher grain
shipments. Revenues rose 10% year over year to $607.4 million,
slightly below the Zacks Consensus Estimate of $608 million.
, the leader in supply chain management and fleet management
services, topped on the bottom line but lagged on top line.
Earnings per share of 92 cents is above the Zacks Consensus
Estimate of 87 cents and higher than the year-ago earnings of 79
cents. Revenues were up 3% year over year but missed our estimate
3 Low Correlated ETFs Surging in Shaky Markets
Despite severe weather disruptions, the two largest U.S. airlines -
- are flying higher with both beating the Zacks Consensus Estimate
on the earnings front. Delta outpaced our earnings estimate by 4
cents while United Continental posted a loss of $1.33 cents,
narrower than our estimate of a loss of $1.38. Revenues for Delta
were slightly above the Zacks Consensus Estimate but lower for
There were also exceptions to the sector performance. Earnings at
the trucking carrier -
- missed our estimate by a nickel while revenues fell short thanks
to rail service disruptions. The world's largest package delivery
- was also hurt by winter storms that raised its cost of shipping.
Both earnings and revenues missed our estimates.
IYT in Focus
The ETF tracks the Dow Jones Transportation Average Index, giving
investors exposure to the small basket of 21 securities. The fund
has a certain tilt towards large cap stock at 54% while mid and
small caps account for the 30% and 15% share, respectively, in the
all the Industrials ETFs here
Further, the product puts nearly 72% of assets in the top 10 firms,
suggesting heavy concentration and dominance of the top 10 holdings
with respect to returns. From a sector perspective, railroad takes
the top spot at 29.18%, while delivery service (20.38%), trucking
(16.91%) and airlines (14.11%) round off to the top four.
The fund has accumulated $872.4 million in AUM while sees good
trading volume of around 279,000 shares a day. It charges 45 bps in
fees and expenses and was up nearly 2.15% in the last 10 trading
XTN in Focus
This fund uses equal weight methodology to each security by
tracking the S&P Transportation Select Industry Index. Holding
46 stocks in its basket with AUM of $117.5 million, each security
accounts for less than 3% of total assets. The ETF is slightly
skewed toward small caps at 43% while the rest is evenly split
between mid and large caps (read:
3 Small Cap ETFs Surging in the Past Month
The product is heavily exposed to trucking and airlines as these
make up roughly 62% of the total while airfreight & logistics
and railroads account for 21% and 13% share, respectively. The fund
charges 35 bps in fees per year from investors and trades in a
light volume of around 19,000 shares a day. XTN added about 2.5%
over the past 10 days.
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ISHARS-TRAN AVG (IYT): ETF Research Reports
SPDR-SP TRANSPT (XTN): ETF Research Reports
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