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Forget Norfolk Southern, Go for These Transportation Stocks - Analyst Blog

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The disappointing outlook issued by railroad operator Norfolk Southern CorporationNSC for the first quarter of 2015, primarily due to weak coal shipments, not only brought down its shares but also impacted the stock prices of other railroad operators like CSX Corp.CSX and Union Pacific Corp.UNP .

Norfolk Southern, which will report first quarter results on Apr 29, stated that it expects first-quarter 2015 earnings to come in at $1.00 per share, which is 15% below the first-quarter 2014 number. The pessimistic forecast caused the Zacks Consensus Estimate of earnings for 2015 to be trimmed by 31 cents to $1.00 per share.

Further, the company expects to report first quarter revenues of $2.6 billion on account of weak demand for coal. The revenue estimate is also shy of the Zacks Consensus Estimate of $2.73 billion and 5% below the year-ago figure.

The railroad operator has pointed out that coal shipments have been experiencing a downward trend mainly due to the decline in coal exports. Apart from weak coal shipments, lower fuel surcharges received from customers due to declining fuel costs and inclement weather are also expected to hurt the company's first quarter results. According to the U.S. Energy Information Administration, coal exports have declined mainly due to weak fuel prices and soft global fuel demand apart from increased output from other coal-exporting nations.

The below-par outlook issued by Norfolk Southern comes close on the heels of another railroad operator Kansas City SouthernKSU slashing its 2015 revenue growth outlook. Last month, Kansas City Southern predicted its first-quarter 2015 revenues to be flat on a year-over-year basis reflecting adverse foreign currency movements, low fuel surcharge revenues and slow carload growth from the energy sector.

The company expects first-quarter 2015 earnings to be flat to slightly higher compared with earnings of $1.05 per share recorded in the first quarter of 2014. Kansas City Southern will report its first quarter earnings on Apr 21. CSX Corp.'s results for the same period, released yesterday, saw a 4% decline in coal revenues. Meanwhile, Union Pacific will disclose its quarterly results on Apr 23. Coal revenues are expected to take a hit for Union Pacific as well.

We expect investors to keep an eye on the impact of weak coal shipments on the first-quarter 2015 results of railroad operators going forward. In view of the weak sentiment prevailing across the railroad spectrum, we believe it is wise for investors to avoid stocks in the space at the moment.

Below we present 3 players in the transportation sector which not only have a good Zacks Rank but have also seen positive estimate revisions lately.

Southwest Airlines Co. LUV , with a Zacks Rank #2 (Buy), has delivered a positive earnings surprise in each of the last 4 quarters with an average beat of 10.07%. The carrier has also surpassed the Zacks Consensus Estimate with respect to revenues in three of the last four quarters.

The Dallas, TX-based carrier has been witnessing positive earnings estimate revisions both for the first quarter as well as full-year 2015 mainly due to weak oil prices . Over the past 4 weeks, the Zacks Consensus Estimate for the first quarter and full-year 2015 has gone up by 2.02% and 1.43%, respectively.

Strategies including fleet restructuring, introduction of international services, increased ancillary product offerings, capacity management and slot wins are expected to boost the company's revenues and reduce expenses going forward. The company, which will report first quarter earnings on Apr 23, has a long-term expected earnings growth rate of 20.01%.

Hawaiian Holdings Inc.HA is a holding company and the sole owner of Hawaiian Airlines. Hawaiian Airlines transports passengers and cargo via air between the Hawaiian Islands as well as across certain U.S. cities. The company also operates flights on international routes originating from the Hawaiian Islands.

This Zacks Rank #2 (Buy) company has seen its earnings estimates for the first quarter and full-year 2015 go up by 3.54% and 1.45% respectively over the past 4 weeks. The company, which has reported higher-than-expected earnings consecutively in the last five quarters, boasts a long-term expected earnings growth rate of 30.24%. The company will report first quarter results on Apr 23.

Teekay Tankers Ltd.TNK , based in Hamilton, Bermuda, sports a Zacks Rank #1 (Strong Buy). The company, which focuses on the marine transportation of crude oil and refined petroleum products across the globe, has delivered better-than-expected earnings in two of the last four quarters with an average beat of 25.56%. The company boasts a long-term expected earnings growth rate of 6.50% and is slated to report first quarter results on May 21.

The stock has seen its earnings estimate for the first quarter of 2015 and full-year 2015 go up by 5.45% and 3.11% respectively over the past 4 weeks.

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SOUTHWEST AIR (LUV): Free Stock Analysis Report

KANSAS CITY SOU (KSU): Free Stock Analysis Report

CSX CORP (CSX): Free Stock Analysis Report

UNION PAC CORP (UNP): Free Stock Analysis Report

NORFOLK SOUTHRN (NSC): Free Stock Analysis Report

HAWAIIAN HLDGS (HA): Free Stock Analysis Report

TEEKAY TANKERS (TNK): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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