The Q1 earnings season has so far unfolded a promising picture. According to the latest Earnings Preview , this positive scenario is expected to continue in the remainder of the current reporting cycle. The above report also projects S&P 500 companies' bottom-line growth of 18.3% year over year. Additionally, stocks in the highly sought-after fraternity are anticipated to end the period with the top line expanding 7.7%.
The report further predicts that 14 of the 16 Zacks sectors will end the ongoing earnings season with a year-over-year increase in the bottom line. Of which, 11 are anticipated to exhibit double-digit earnings growth.
One of those sectors is the Zacks Transportation sector , wherein earnings are anticipated to increase 19%. Notably, this highly diversified sector includes airlines, railroads, truckers, equipment and leasing companies, among others. We believe that the favorable economic indicators along with the new tax law bodes well for the sector participants.
Already, key sector participants from Transportation namely, United Continental Holdings, Inc. UAL , CSX Corporation CSX and Delta Air Lines Inc. DAL posted better-than-expected earnings per share and revenues in the current reporting cycle.
However, high fuel costs have emerged as a major headwind for transports in Q1. Evidently, the same has induced bottom-line contraction of the likes of Delta and the trend is likely to continue for the remainder of the season.
Given this backdrop, investors interested in the Transportation space will keenly await Q1 reports from key sector participants like American Airlines Group Inc. AAL , Southwest Airlines Co. LUV , United Parcel Service, Inc. UPS and Union Pacific Corporation UNP , which are scheduled for Apr 26.
According to our quantitative model, a company needs the right combination of two key ingredients - a positive Earnings ESP and a Zacks Rank #3 (Hold) or better - to increase the odds of an earnings surprise. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
American Airlines Group operates more than 6,700 daily flights to over 330 destinations in more than 50 nations across the globe. The chances of this Fort Worth, TX-based company beating the Zacks Consensus Estimate are less, despite its Zacks Rank #3. This is because it has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 74 cents (Read more: What to Expect From American Airlines in Q1 Earnings? ).
American Airlines Group Inc. Price and EPS Surprise
American Airlines Group Inc. Price and EPS Surprise | American Airlines Group Inc. Quote
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
The Dallas-based Southwest Airlines is a low-cost carrier. According to our proven model this company is not likely to beat earnings estimates. This is because it has an Earnings ESP of -2.04% and a Zacks Rank #4 (Sell) (Read more: Is Southwest Airlines Q1 Earnings Set to Disappoint? ).
As it is, we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Southwest Airlines Co. Price and EPS Surprise
Southwest Airlines Co. Price and EPS Surprise | Southwest Airlines Co. Quote
United Parcel Serviceis the world's largest express carrier and package delivery company. Its chances of an earnings beat are low, despite its Zacks Rank #3. This is because it has an Earnings ESP of -0.55% as the Most Accurate estimate is pegged at $1.53, a penny lower than the Zacks Consensus Estimate (Read more: UPS Q1 Earnings: What's in Store? ).
United Parcel Service, Inc. Price and EPS Surprise
United Parcel Service, Inc. Price and EPS Surprise | United Parcel Service, Inc. Quote
Union Pacific Corporation is a renowned U.S. Class 1 railroad company based in Omaha, NE. It has high chances of beating the Zacks Consensus Estimate. This is because as the company has an Earnings ESP of +0.04% and a Zacks Rank #3 (Read more: Will Volume Growth Boost Union Pacific's Q1 Earnings? ).
Union Pacific Corporation Price and EPS Surprise
Union Pacific Corporation Price and EPS Surprise | Union Pacific Corporation Quote
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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 Southwest Airlines Co. (LUV): Free Stock Analysis Report Delta Air Lines, Inc. (DAL): Free Stock Analysis Report United Continental Holdings, Inc. (UAL): Free Stock Analysis Report American Airlines Group Inc. (AAL): Free Stock Analysis Report CSX Corporation (CSX): Free Stock Analysis Report Union Pacific Corporation (UNP): Free Stock Analysis Report United Parcel Service, Inc. (UPS): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research