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Transport ETFs Riding High Post Q3 Earnings

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Travel has rebounded strongly as the economy is recovering with more Americans being vaccinated, businesses reopening, and consumer confidence growing. A strong summer driving season and rounds of upbeat earnings have added fuel to transportation.

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 $2.71 per share were 19 cents ahead of the consensus mark and the top line of $23.18 billion came in above the estimated $22.6 billion.

Major railroads Union Pacific (UNP - Free Report) and Norfolk Southern Corp (NSC - Free Report) came up with better-than-expected earnings while Kansas City lagged the consensus earnings estimate. Union Pacific outpaced the earnings estimate by 9 cents and the revenue estimate by $184 million and Norfolk topped the earnings estimate by 17 cents and the revenue estimate by $112 million. Kansas City fell short of the earnings estimate by 5 cents but edged past the revenue estimate by $18 million.

U.S. airlines Delta Air Lines (DAL - Free Report) and United Continental (UAL - Free Report) delivered better-than-expected results. Delta reported earnings per share of 30 cents, beating the Zacks Consensus Estimate of 15 cents per share. The air carrier incurred loss of $3.30 per share in the year-ago quarter. Revenues of $9.15 billion topped the consensus mark of $8.41 billion. United posted a loss of $1.02 per share, narrower than the Zacks Consensus Estimate of a loss of $1.65 and revenues of $7.75 billion came in above the estimated $7.64 billion (read: Earnings or Oil: What Will Impact the Airlines ETF Ahead?).

Last but not the least, leading trucking carrier J.B. Hunt (JBHT - Free Report) beat the estimate for earnings by 11 cents per share and for revenues by $143 million.

ETFs in Focus

The Q3 earnings reports have led to smooth trading in transport ETFs over the past month. As such, iShares U.S. Transportation ETF (IYT - Free Report) , SPDR S&P Transportation ETF (XTN - Free Report) and First Trust Nasdaq Transportation ETF (FTXR - Free Report) have gained in double-digits each. 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 S&P Transportation Select Industry FMC Capped Index, giving investors exposure to a small basket of 48 securities. The in-focus seven firms make up for a combined 51% share. From a sector perspective, railroads, and air freight & logistics take the largest share at 35.1% and 28.1%, respectively, while trucking and airlines round off the next two spots with a double-digit exposure each. The fund has accumulated $1.8 billion in its asset base and sees a solid trading volume of around 179,000 shares a day. It charges 41 bps in annual fees.

XTN

This fund tracks the S&P Transportation Select Industry Index, holding 48 stocks in its basket. The in-focus firms account for around 2% share each. Further, 38.7% of the portfolio is dominated by trucking while airlines, and air freight & logistics take at least 20% share each. With AUM of $834.4 million, the fund charges 35 bps in fees per year from its investors and trades in a volume of around 126,000 shares a day (read: 5 Sector ETFs to Benefit Despite Downbeat September Jobs Data).

FTXR

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. The in-focus seven firms represent a combined 20% share. Trucking, railroads, automobiles and airlines are the top sectors accounting for double-digit exposure each. FTXR has amassed $1.2 billion in its asset base and charges 60 bps in annual fees. The average trading volume is a modest 81,000 shares.