Transport ETFs Gain Despite Soft Q2 Earnings

Sweta Killa
·5-min read

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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