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Transport ETFs Gain on Solid Q2 Earnings

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Travel has rebounded strongly as the economy recovers with more Americans being vaccinated, business and economy reopening, and consumer confidence growing. A strong summer driving season and rounds of upbeat earnings are adding fuel to transportation (read: U.S. Economy Returns to Pre-Pandemic Level: 4 ETF Picks).

For a better understanding, let’s delve into the results of some well-known industry players:

Transportation Earnings in Brief

The world's largest package delivery company United Parcel Service (UPS - Free Report) topped the estimates on both revenues and earnings. Earnings of $2.75 per share were 31 cents ahead of the consensus mark and the top line of $23.4 billion came in above the estimated $23.1 billion.

Major railroads Union Pacific (UNP - Free Report) and Norfolk Southern Corp (NSC - Free Report) came up with better-than-expected earnings season while Kansas City lagged on earnings. Union Pacific outpaced the earnings estimate by 17 cents and the revenue estimate by $120 million and Norfolk topped the earnings estimate by 34 cents and the revenue estimate by $48 million. Kansas City fell short of the earnings estimate by 10 cents but edged past the revenue estimate by $16 million.

U.S. airlines Delta Air Lines (DAL - Free Report) and United Continental (UAL - Free Report) delivered better-than-expected results. Delta incurred a loss of $1.07 per share, narrower than the Zacks Consensus Estimate of a loss of $1.41. Revenues of $7.13 billion topped the consensus mark of $6.3 billion. United posted a loss of $3.91 per share, narrower than the Zacks Consensus Estimate of a loss of $4.17 and revenues of $5.47 billion came in above the estimated $5.31 billion.

Last but not the least, leading trucking carrier J.B. Hunt (JBHT - Free Report) beat the estimates for earnings by 6 cents per share and for revenues by $186 million.

ETFs in Focus

The Q2 earnings reports have led to smooth trading in transport ETFs over the past 10 days. As such, 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) have gained 0.4%, 4.6% and 2.9%, respectively. All these products currently have a Zacks ETF Rank #2 (Buy), suggesting their outperformance in the months ahead (see: all the Industrials ETFs here).

IYT

The fund tracks the Dow Jones Transportation Average Index, giving investors exposure to a small basket of 44 securities. The in-focus seven firms make up for a combined 50.4% share. From a sector perspective, railroads, and air freight & logistics take the largest share at 34.2% and 29.8%, respectively, while trucking and airlines round off the next two spots with a double-digit exposure each. The fund has accumulated $1.6 billion in its asset base and sees a solid trading volume of around 252,000 shares a day. It charges 42 bps in annual fees.

XTN

This fund tracks the S&P Transportation Select Industry Index, holding 45 stocks in its basket. The in-focus firms account for around 2% share each. Further, 35.4% of the portfolio is dominated by trucking while air freight & logistics, and airlines take around another one-fourth share each. With AUM of $498.1 million, the fund charges 35 bps in fees per year from investors and trades in a lower volume of around 98,000 shares a day (read: 4 Top-Ranked ETFs to Buy for Second Half of 2021).

FTXR

This fund offers exposure to the 30 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 25.7% share. Railroads takes the top spot at 17.7% while trucking and transportation services round off the next spots with a double-digit exposure each. FTXR has amassed $1.1 billion in its asset base and charges 60 bps in annual fees. The average trading volume is a modest 62,000 shares.