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Transport ETFs to Gain on FedEx Earnings

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After the closing bell on Sep 15, transport bellwether FedEx (FDX - Free Report) reported solid fiscal 2021 first-quarter results. The courier company outpaced earnings and revenue estimates.

Earnings per share came in at $4.87, surpassing the Zacks Consensus Estimate of $2.59 and improving from the year-ago earnings of $3.05. Revenues grew 14% year over year to $19.32 billion and edged past the estimated $17.45 billion. Robust performances were driven by higher volume growth in FedEx International Priority and U.S. domestic residential package services as well as yield improvement at FedEx Ground and FedEx Freight.

The robust results sent FDX shares jumping more than 5% in afterhour trading. FedEx has a Rank #3 (Hold) and an impressive VGM Score of A. It currently falls under a top-ranked Zacks industry (top 9%).

ETFs in Focus

The FedEx earnings report has put transport ETFs — iShares Dow Jones Transportation Average Fund (IYT - Free Report) , SPDR S&P Transportation ETF (XTN - Free Report) and First Trust Nasdaq Transportation ETF (FTXR - Free Report) — in focus. All these funds currently have a Zacks ETF Rank #4 (Sell) (see: all the Industrials ETFs here).

IYT

The ETF tracks the Dow Jones Transportation Average Index, giving investors exposure to a small basket of 20 securities. Of these, FedEx occupies the top position with 12.6% of the assets. Within the transportation sector, railroads, and air freight and logistics take the top two spots with 36.6% and 31.4% share, respectively, while trucking (17.9%) and airlines (9.5%) round off the next two. The fund has accumulated nearly $1 billion in AUM while it sees a good trading volume of around 211,000 shares a day. It charges 42 bps in fees per year (read: Sector ETFs to Win or Lose on Storm-Led Oil Price Jump).

XTN

This fund follows the S&P Transportation Select Industry Index and uses almost an equal-weight methodology for each security. Holding 42 stocks with AUM of $297.9 million, FedEx takes the top spot accounting for 4% share in the basket. The product is heavily exposed to trucking, which represents more than one-third of the portfolio while air freight & logistics and airlines take up 26.8% and 22.6% share, respectively. The fund charges 35 bps in fees per year from investors and trades in a light volume of about 54,000 shares a day.

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. FedEx holds 2.4% share in the basket. Here, ground freight & logistics takes the largest share at 33.3%, followed by auto & truck manufacturers (23.2%), air freight & courier service (14.9%), and auto, truck & motorcycle parts (14.5%). FTXR has amassed $599.7 million in its asset base and charges 60 bps in annual fees. Average trading volume is moderate at 203,000 shares (read: 5 Sector ETFs That Beat the Market in August).

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