The Q3 earnings season is in its latter half with a high proportion of companies having already unveiled their quarterly financial numbers.
The picture that has emanated so far is an extremely healthy one and the Q3 earnings season remains on track to end on a strong note by displaying substantial growth. Markedly, many companies have reported better-than-expected earnings per share in the current reporting cycle.
In fact, the impressive scenario with respect to earnings outperformance is reflected by the latest Earnings Preview
. Per the report, approximately 75.7% of the S&P 500 members have outperformed on the bottom-line front.
Despite the well-documented headwinds plaguing the highly-diversified Zacks Transportation sector
(one of the 16 Zacks sectors), quite a few sector participants like American Airlines Group
) and Norfolk Southern Corp
. ( NSC
) have reported better-than-expected earnings per share in Q3. Lowered Bar Facilitates Earnings Beats
We suspect that the reason for the high proportion of transportation companies reporting better-than-expected Q3 earnings despite the headwinds lies in the conservative nature of the Zacks Consensus Estimate.
Notably, earnings estimates have been moving south for quite some time due to the challenges confronting this sector.
In this context, let's consider the case of American Airlines. The Zacks Consensus Estimate third-quarter 2017 for the carrier was pegged at $1.39, much lower than the year-ago figure of $1.68. The conservative nature of the Zacks Consensus Estimate has made it easier for transportation companies to surpass them in the quarter. Zacks Methodology to the Rescue
Even though a high proportion of transportation players have already revealed their quarterly numbers, quite a few players are yet to announce their results. As has been the case so far in Q3, quite a few of them will outperform with respect to the bottom-line despite the overall challenges confronting the sector.
Additionally, it is a well-established fact that an earnings beat more often boosts investor confidence in the stock that translates into rapid price appreciation. However, with a plethora of stocks available in the market at any point of time, spotting potential outperformers is by no means an easy task for individual investors. In the absence of proper guidance, to identify a winning stock is akin to searching for 'a needle in a haystack', for an investor.
This is where the Zacks methodology shows its mettle. It simplifies the task of stock selection by combining a favorable Zacks Rank - a Zacks Rank #1 (Strong Buy) or 2 (Buy) or 3 (Hold) - and a positive Earnings ESP
. Research shows that for stocks with this combination, the chances of a positive earnings surprise are as high as 70%. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter
Earnings ESP is our proprietary methodology for identifying stocks that have high chances of surprising in their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate.
Five Transportation Picks
Based on the above methodology, we have zeroed in on five transportation stocks that are likely to beat the Zacks Consensus Estimate for earnings in Q3. We believe that these stocks could turn out to be great additions to your portfolio and are worth a look.
LATAM Airlines Group S.A. ( LTM ) offers domestic and international passenger and cargo air services. Based in Santiago, Chile, the company carries a Zacks Rank #3 and has an Earnings ESP of +15.94%. This is because the Most Accurate estimate is pegged at 3 cents above the Zacks Consensus Estimate of 17 cents. The favorable combination makes an earnings beat likely in the quarter. The company will report third-quarter 2017 results on Nov 15. You can see the complete list of today's Zacks #1 Rank stocks here .
Star Bulk Carriers Corp . ( SBLK ) is a leading global shipping company in the dry bulk sector. This Greece-based carrier has an Earnings ESP of +79.49% and a Zacks Rank #3. The company is expected to reveal its third-quarter results on Nov 20.
Genco Shipping & Trading Ltd . ( GNK ) engages in ocean transportation of drybulk cargoes worldwide. Based in New York, this company has an Earnings ESP of +10.74% and a Zacks Rank #3. It will report third-quarter 2017 results on Nov 1.
Triton International Limited ( TRTN ) engages in acquisition, leasing, re-leasing, and sale of intermodal containers. The company has an Earnings ESP of +2.04% and a Zacks Rank #3. It is expected to report its third-quarter 2017 results on Nov 9.
Kirby Corporation ( KEX ) is a well-known shipping company. Based in Houston, TX, the company carries a Zacks Rank #3 and has an Earnings ESP of +15.94%. This is because the Most Accurate estimate is pegged at 2 cents above the Zacks Consensus Estimate of 44 cents. The company is scheduled to report its third-quarter 2017 results on Nov 1.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Triton International Limited (TRTN): Free Stock Analysis Report Genco Shipping & Trading Limited Warrants Expiring 12/31/2021 (GNK): Free Stock Analysis Report Kirby Corporation (KEX): Free Stock Analysis Report Star Bulk Carriers Corp. (SBLK): Free Stock Analysis Report LATAM Airlines Group S.A. (LTM): Free Stock Analysis Report American Airlines Group, Inc. (AAL): Free Stock Analysis Report Norfolk Souther Corporation (NSC): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research