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Labor Shortages Hit FedEx Q1 Earnings: ETFs in Focus

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After the closing bell on Sep 22, transport bellwether FedEx (FDX - Free Report) delivered mixed first-quarter fiscal 2022 results. The courier company lagged earnings estimates but beat on revenues. It cut its financial outlook for the fiscal year 2022 due to labor shortages.

Earnings per share came in at $4.37, missing the Zacks Consensus Estimate of $4.96 and were below the year-ago earnings of $4.87. Revenues grew 14% year over year to $22 billion and edged past the estimated $21.8 billion. Increased labor costs took a toll on the company’s profitability. Staffing problems resulted in a $450 million year-over-year increase in costs during the quarter due to higher wage rates and overtime, increased spending on third-party transportation services and shipping hiccups.

For fiscal 2022, the company lowered its adjusted earnings per share forecast to the range of  $19.75-$21.00 from $20.50-$21.50. The low end of the guidance is below the Zacks Consensus Estimate of $21.27 (see: all the Industrials ETFs here).

Driven by fears of labor shortages and the resultant rise in cost, FDX shares fell as much as 4.6% in after-market hours. FedEx currently has a Zacks Rank #3 (Hold) and an impressive VGM Score of A.

ETFs to Watch

This has put ETFs with a higher allocation to FedEx in the spotlight. Below we have highlighted some of the funds:

iShares U.S. Transportation ETF (IYT - Free Report)

The ETF tracks the S&P Transportation Select Industry FMC Capped Index, giving investors exposure to a small basket of 49 securities. Of these, FedEx occupies the seventh position with 4.4% of the assets. Within the transportation sector, railroads, and air freight and logistics take the top two spots with 32.1% and 28.7% share, respectively, while trucking (21.3%) and airlines (16.1%) round off the next two. The fund has accumulated $1.5 billion in AUM while it sees a good trading volume of around 204,000 shares a day. It charges 41 bps in fees per year and has a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: ETF Areas to Gain From the Upcoming Holiday Shopping Season).

First Trust Nasdaq Transportation ETF (FTXR - Free Report)

This fund offers exposure to the 29 most-liquid U.S. transportation securities based on volatility, value and growth by tracking the Nasdaq US Smart Transportation Index. FedEx holds 3.9% share in the basket. Trucking, railroads, airlines, automobiles, and transport services occupy the top spots in the basket. FTXR has amassed $1.1 billion in its asset base and charges 60 bps in annual fees. The average trading volume is moderate at 81,000 shares. The fund has a Zacks ETF Rank #2.

SPDR S&P Transportation ETF (XTN - Free Report)  

This fund follows the S&P Transportation Select Industry Index and uses almost an equal-weight methodology for each security. Holding 49 stocks with an AUM of $485.3 million, FedEx accounts for 2.1% 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 25.7% and 20% share, respectively. The fund charges 35 bps in fees per year from investors and trades in a volume of about 61,000 shares a day, on average. It has a Zacks ETF Rank #2 with a Hugh risk outlook (read: Buy These 7 Amazing ETFs Trading at Low P/E Ratios).

Emles Home ETF

This fund provides investors access to high quality companies that potentially stand to benefit from the structural shift toward home-based lifestyle by tracking the Emles Home Lifestyle Index. It holds 31 stocks in its basket with FedEx occupying 2% share. The product has accumulated $3.5 million in its asset since its inception last October and trades in an average daily volume of under 1,000 shares. It charges 49 bps in annual fees.

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