5 Transportation Stocks Likely To Top Q3 Earnings Estimates

Also, the sluggishness of the automotive unit is a cause of concern for railroads. For trucking companies, shortage of drivers remains a major headwind. Meanwhile, the rise in labor costs have hurt J.B. Hunt Transport Services’ third-quarter results and the trend is likely to continue in the rest of Q3.

Increase in Fuel Costs

The rise in fuel costs does not augur well for transports. This is because costs associated with oil are considered to be one of the major input for any transportation company.

Of late, fuel costs are on the rise with oil prices crossing the $50 a barrel threshold. This upsurge can be attributed to the improving demand outlook for the commodity and OPEC deal extension talks. Harvey also contributed to the same owing to gasoline shortages caused by the storm.

Some Tailwinds Remain

Despite the challenges, there are some positives for the sector participants. For example, improvement in the coal scenario has turned out to be a huge blessing for railroads as it is a key revenue generating commodity for them.

The election of Donald Trump as the President of United States last year also worked wonders for the coal industry.  This is because Trump is in favor of reviving the industry by relaxing regulations detrimental to its prospects.

Moreover, the busy Labor Day travel period (Aug 30-Sep 5) for U.S. airlines this year substantiates the strong demand for air travel, which in turn bodes well for airlines.

Additionally, the upcoming holiday season is expected to be another factor aiding the turnaround efforts of the transportation sector. Travel plans this season are likely to surge owing to a number of bullish factors like solid job growth, rising wages and increased consumer spending.

The advent of the holiday season also implies that package delivery companies like FedEx Corporation and United Parcel Service have their hands full. Markedly, they are leaving no stone unturned to meet surge in demand.

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