Slew Of Solid Q3 Earnings Pushes Transport ETFs Higher

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The third-quarter earnings picture for the transportation sector has been shaping up strongly. This is especially true as the sector is the second-biggest contributor to Q3 earnings and the third-largest contributor to revenue growth so far. Earnings for 97.2% market capitalization of the sector that has been reported already are up 62.3% on 21.5% revenue growth. The earnings and revenue beat ratio of 85.7% and 50%, respectively, is impressive too.

The wave of strong results pushed transportation ETFs higher over the past month. iShares U.S. Transportation ETF (IYT - Free Report), SPDR S&P Transportation ETF (XTN - Free Report), and First Trust Nasdaq Transportation ETF (FTXR - Free Report) are up 5.5%, 8.1%, and 7.3%, respectively.

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

Transportation Earnings in Brief

The world's largest package delivery company United Parcel Service (UPS - Free Report) surpassed the Zacks Consensus Estimate for earnings and lagged revenue estimates. Earnings of $2.99 per share were 15 cents ahead of the consensus mark but the top line of $24.16 billion came in below the estimated $24.28 billion.

Major railroads Union Pacific (UNP - Free Report) and Norfolk Southern Corp (NSC - Free Report) also came up with better-than-expected earnings. Union Pacific outpaced the consensus earnings estimate by 13 cents and the revenue estimate by $125 million. Norfolk topped the earnings estimate by 46 cents and the revenue estimate by $123 million.

U.S. airlines Delta Air Lines (DAL - Free Report) lagged both earnings and revenue estimates while United Continental (UAL - Free Report) topped. Delta reported earnings per share of $1.51, falling short of the Zacks Consensus Estimate of $1.56. Revenues of $13.97 billion fell short of the consensus mark of $14.16 billion. United Continental posted earnings of $2.81 per share, outpacing the Zacks Consensus Estimate of $2.21. Revenues of $12.88 billion came in above the estimated $12.67 billion.

Last but not the least, leading trucking carrier J.B. Hunt (JBHT - Free Report) beat the estimates for earnings by 12 cents per share and for revenues by $35 million.
 

ETFs in Focus

iShares U.S. Transportation ETF (IYT Quick)

iShares U.S. Transportation ETF tracks the S&P Transportation Select Industry FMC Capped Index, giving investors exposure to a small basket of 50 securities. The in-focus six firms make up a combined 50% share. From a sector perspective, air freight & logistics, and railroads take the largest share at 29% each, while trucking and airlines round off the next two spots with double-digit exposure each.

iShares U.S. Transportation ETF has accumulated $758.2 million in its asset base and sees a solid trading volume of around 237,000 shares a day. It charges 39 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
 

SPDR S&P Transportation ETF (XTN)

SPDR S&P Transportation ETF tracks the S&P Transportation Select Industry Index, holding 50 stocks in its basket. The in-focus firms account for around 2% share each. About 38% of the portfolio is dominated by trucking, while airlines and air freight & logistics take 28.1% and 18.3% share, respectively.

With an AUM of $434.2 million, SPDR S&P Transportation ETF charges 35 bps in fees per year from its investors and trades in a volume of around 38,000 shares a day. It has a Zacks ETF Rank #3 with a Medium risk outlook.
 

First Trust Nasdaq Transportation ETF (FTXR)

First Trust Nasdaq Transportation ETF 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 six firms represent a combined 21.8% share. Railroads, trucking, automobiles, and auto parts are the top sectors accounting for double-digit exposure each.

First Trust Nasdaq Transportation ETF has amassed $70.1 million in its asset base and charges 60 bps in annual fees. The average trading volume is good at 17,000 shares.


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