Markets

Transport ETFs Gain Despite Soft Q2 Earnings

The transportation sector has been badly impacted by the coronavirus pandemic, which had halted almost all activities in the United States. As such, second-quarter earnings are painting a dismal picture for the sector.

Total earnings accounting for 73% of the sector’s market capitalization that have been reported so far are down 178.1% on 50.9% lower revenues. The earnings and revenue beat ratio came in at 53.8% and 69.2%, respectively, as most industry players managed to surpass on both or either counts (see: all the Industrials ETFs here).

For a better understanding, let’s delve into the results of some well-known industry players:

Transportation Earnings in Focus

The world's largest package delivery company United Parcel Service UPS topped the estimates on both revenues and earnings. Earnings of $2.13 per share were $1.09 ahead of the consensus mark while the top line of $20.46 billion was above the estimated $17.34 billion.

Major railroads Union Pacific UNP, Kansas City Southern KSU and Norfolk Southern Corp NSC posted a mixed bag. Union Pacific outpaced on earnings by 6 cents but missed on revenues by $155 million while Kansas City surpassed on earnings by 3 cents and missed on revenues by $2 million. Meanwhile, Norfolk Southern beat the consensus mark on earnings per share by 14 cents and revenues by $24 million (read: 5 ETFs to Make the Most From Fourth of July).

U.S. airlines Delta Air Lines DAL and United Continental UAL delivered worse-than-expected results. Delta incurred a loss of $4.43 per share, wider than the Zacks Consensus Estimate of a loss of $3.97. This represents the first quarterly loss since 2010. Revenues of $1.47 billion edged past the consensus mark of $1.4 billion. United Continental posted a loss of $9.31 per share, wider than the Zacks Consensus Estimate of a loss of $9.13 while revenues of $1.47 billion were above the estimated $1.22 billion.

Last but not the least, leading trucking carrier J.B. Hunt JBHT topped on earnings by 31 cents per share and on revenues by $85 million.

ETFs in Focus

Despite the overall dismal earnings picture, the sector has gained 2.22% (average price difference between a day before and after the earnings announcement of a stock) post results. Thus, iShares Transportation Average ETF IYT, SPDR S&P Transportation ETF XTN and First Trust Nasdaq Transportation ETF FTXR has been on a smooth ride over the past month, gaining 8.4%, 4.01% and 4.4%, respectively. However, all these products currently have a Zacks ETF Rank #4 (Sell).

IYT

The fund tracks the Dow Jones Transportation Average Index, giving investors exposure to a small basket of 20 securities. The in-focus seven firms make up for a combined 52% share. From a sector perspective, railroads, and air freight & logistics take the largest share with 36.1% and 24.6% share, respectively, while trucking and airlines round off the next two spots with a double-digit exposure each. The fund has accumulated $664.2 million in AUM and sees a solid trading volume of around 188,000 shares a day. It charges 42 bps in annual fees.

XTN

This fund tracks the S&P Transportation Select Industry Index, holding 42 stocks in its basket. The in-focus firms account for not more than 3.5% share each. Further, 35.5% of the portfolio is dominated by trucking while air freight and logistics take around one-fourth share. With AUM of $198.3 million, the fund charges 35 bps in fees per year from investors and trades in a lower volume of around 52,000 shares a day (read: Travel & Leisure ETFs Jump on Vaccine Optimism).

FTXR

This fund offers exposure to the 31 most-liquid U.S. transportation securities based on volatility, value and growth by tracking the Nasdaq US Smart Transportation Index. The in-focus seven firms represent a combined 17.7% share. Ground freight & logistics takes the top spot at 33.1% while auto & truck manufacturers, auto, truck & motorcycle parts, airlines, and air freight & courier services round off the next spots with a double-digit exposure each. FTXR has amassed $6.3 million in its asset base and charges 60 bps in annual fees. Average trading volume amounts to a meager 5,000 shares.

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Union Pacific Corporation (UNP): Free Stock Analysis Report

Kansas City Southern (KSU): Free Stock Analysis Report

United Parcel Service, Inc. (UPS): Free Stock Analysis Report

Delta Air Lines, Inc. (DAL): Free Stock Analysis Report

Norfolk Southern Corporation (NSC): Free Stock Analysis Report

United Airlines Holdings Inc (UAL): Free Stock Analysis Report

J.B. Hunt Transport Services, Inc. (JBHT): Free Stock Analysis Report

iShares Transportation Average ETF (IYT): ETF Research Reports

SPDR SP Transportation ETF (XTN): ETF Research Reports

First Trust NASDAQ Transportation ETF (FTXR): ETF Research Reports

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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.

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