Transport ETFs To Watch On Earnings [SPDR Series Trust, Union Pacific Corporation, Kansas City Southern]

transportationDespite the fact that harsh weather had restricted the movement of people and goods by road, air or ship last quarter, most of the transportation companies have either easily managed to meet or beat the Zacks Consensus Estimate on the earnings front. This suggests strong confidence in the recovering U.S. economy and continued strength in the sector.

Earnings from some companies such as Union Pacific (UNP), Kansas City Southern (KSU), Ryder Systems (R), Delta Air Lines (DAL) and United Continental (UAL), in particular have been inspiring. However, lackluster performance by J.B. Hunt (JBHT) and United Parcel Service (UPS) were the dampeners.

Nonetheless, iShares Dow Jones Transportation Average Fund (NYSEARCA:IYT) surged to an all-time high of $139.45 on April 24 while SPDR S&P Transportation ETF (NYSEARCA:XTN) is close to its record high of $88.63 reached in early April. Both funds are crushing the broad blue-chip (DIA) and broad sector (XLI) funds by wide margins over the past 10 days.

Both the products have solid Zacks ETF Rank of 2 or ‘Buy’, suggesting that their outperformance would continue in the coming months as well.

Transportation Earnings in Focus

UNP, the U.S. largest railroad, reported earnings of $2.38 per share matching the Zacks Consensus Estimate but 17% higher than the year-ago earnings. Revenues of $5.6 billion climbed 7% year over year but missed the Zacks Consensus Estimate of $5.7 billion. Robust year-over-year performance is credited to higher volume and increased coal shipments.

Another major railroad, KSU, posted strong earnings of $1.05 per share comfortably beating the Zacks Consensus Estimate by 7 cents and improving from the year-ago earnings by 16 cents. This is primarily owing to higher grain shipments. Revenues rose 10% year over year to $607.4 million, slightly below the Zacks Consensus Estimate of $608 million.

Ryder, the leader in supply chain management and fleet management services, topped on the bottom line but lagged on top line. Earnings per share of 92 cents is above the Zacks Consensus Estimate of 87 cents and higher than the year-ago earnings of 79 cents. Revenues were up 3% year over year but missed our estimate (read: 3 Low Correlated ETFs Surging in Shaky Markets).

Despite severe weather disruptions, the two largest U.S. airlines – DAL and UAL– are flying higher with both beating the Zacks Consensus Estimate on the earnings front. Delta outpaced our earnings estimate by 4 cents while United Continental posted a loss of $1.33 cents, narrower than our estimate of a loss of $1.38. Revenues for Delta were slightly above the Zacks Consensus Estimate but lower for United Continental.

There were also exceptions to the sector performance. Earnings at the trucking carrier – JBHT – missed our estimate by a nickel while revenues fell short thanks to rail service disruptions. The world’s largest package delivery company – UPS – was also hurt by winter storms that raised its cost of shipping. Both earnings and revenues missed our estimates.  

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