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Transport ETFs in Focus Post FedEx Solid Results

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After the closing bell on Dec 17, transport bellwether FedEx (FDX - Free Report) reported stellar fiscal 2021 second-quarter results. The courier company outpaced earnings and revenue estimates.

Earnings per share came in at $4.83, surpassing the Zacks Consensus Estimate of $3.90 and improving from the year-ago earnings of $2.51. Revenues grew 19% year over year to a record $20.6 billion and edged past the estimated $19.3 billion. This is the first time that FedEx has reported sales of more than $20 billion and double the earnings of last year. Robust performances were driven by higher volume growth in FedEx International Priority and U.S. domestic residential package services (read: Why Cyclical Sector ETFs Are Roaring to All-Time Highs).

Despite the robust results, FDX shares dropped almost 4% in after market hours. FedEx has a Rank #3 (Hold) and an impressive VGM Score of A. It currently falls under a top-ranked Zacks industry (top 17%).

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 #3 (Hold) (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 14.1% of the assets. Within the transportation sector, railroads, and air freight and logistics take the top two spots with 34.6% and 31.3% share, respectively, while trucking (18.2%) and airlines (10.4%) round off the next two. The fund has accumulated $1.5 billion in AUM while it sees a good trading volume of around 214,000 shares a day. It charges 42 bps in fees per year (read: 6 Secret Santa ETFs to Add Cheer to Your Portfolio).

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 $429 million, FedEx takes accounts for 2.7% share in the basket. The product is heavily exposed to trucking, which represents more than one-third of the portfolio while airlines, and air freight & logistics make up 28% and 21.5% share, respectively. The fund charges 35 bps in fees per year from investors and trades in an average volume of about 429,000 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 2.2% share in the basket. Here, ground freight & logistics takes the largest share at 33.3%, followed by auto & truck manufacturers (20.5%), auto, truck & motorcycle parts (15.7%), and airlines (14.7%). FTXR has amassed $797.7 million in its asset base and charges 60 bps in annual fees. The average trading volume is moderate at 115,000 shares.

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