Transport ETFs Rally on Solid Start to Earnings Season

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The transportation sector has been off to a strong start this earnings season. Most industry players managed to beat on earnings or revenues or on both counts, instilling huge optimism in the space.

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’s (UPS - Free Report) top and the bottom line beat the Zacks Consensus Estimate. Earnings of $2.07 were a penny ahead of the consensus mark while revenues of $18.32 billion edged past the estimated $18.3 billion. For 2019, the company reiterated earnings per share in the range of $7.45-$7.75.

Union Pacific (UNP - Free Report) missed the Zacks Consensus Estimate for earnings by 7 cents and that for revenues by $107 million. Meanwhile, Kansas City Southern’s (KSU - Free Report) earnings of $1.94 per share topped estimates by 17 cents while revenues of $748 million came ahead of the estimated $730 million.

U.S. airlines Delta Air Lines (DAL - Free Report) and United Continental (UAL - Free Report) beat on earnings but lagged on revenues. Earnings per share at Delta and United Continental trumped the Zacks Consensus Estimate by 5 cents and 13 cents, respectively. Revenues of $12.56 billion for Delta and $11.4 billion for United Continental were below the estimated $12.62 billion and $11.42 billion, respectively (read: 4 Sector ETFs & Stocks to Bet on Ahead of Q3 Earnings).

Delta projects weaker-than-expected earnings per share for the ongoing quarter, forecasting EPS of $1.20-$1.50. The midpoint is much lower than the Zacks Consensus Estimate of $1.50. United Continental raised its full-year earnings guidance from $10.5-$12 to $11.25-$12.25. The mid-point of the new range was below the Zacks Consensus Estimate of $11.81.

Last but not the least, leading trucking carrier J.B. Hunt (JBHT - Free Report) missed on earnings by 4 cents per share while revenues of $2.36 billion topped the consensus estimate of $2.34 billion.

ETFs in Focus

Solid results have led to smooth trading in transportation ETFs over the past week. iShares Transportation Average ETF (IYT - Free Report) , SPDR S&P Transportation ETF (XTN - Free Report) and First Trust Nasdaq Transportation ETF (FTXR - Free Report) all gained more than 3% in the same time frame. However, all these ETFs 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 six firms make up for a combined 39.6% share. From a sector perspective, railroads, and air freight & logistics take the largest share with 32.6% and 24.6% share, respectively, while airlines and trucking round off the next two spots with double-digit exposure each. The fund has accumulated nearly $516.5 million in AUM and sees solid trading volume of around 228,000 shares a day. It charges 42 bps in annual fees (read: FedEx Disappoints: Transport ETFs in Focus).

XTN

This fund tracks the S&P Transportation Select Industry Index holding 44 stocks in its basket. The in-focus firms account for no more than 3% share each. Further, about 36.3% of the portfolio is dominated by trucking while airlines takes around one-fourth share. With AUM of $126 million, the fund charges 35 bps in fees per year from investors and trades in a lower volume of around 12,000 shares a day.

FTXR

This fund offers exposure to the 30 most-liquid U.S. transportation securities based on volatility, value and growth by tracking the Nasdaq US Smart Transportation Index. The in-focus six firms represent a combined 35.2% share. Ground freight & logistics takes the top spot at 30.4% while airlines, auto & truck manufacturers as well as auto, truck & motorcycle parts round off the next three. FTXR has accumulated $2.4 million in its asset base and charges 60 bps in annual fees. Average trading volume amounts to meager 4,000 shares.