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A Look at Transport ETFs Post Q1 Earnings

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The first-quarter earnings picture for the transportation sector has been mixed. This is especially true as earnings for 100% market capitalization of the sector that has reported already are down 351.3% on 33.7% revenue growth. Although transportation is the biggest laggard in Q1 earnings growth, it is the second contributor to S&P 500 revenue growth. The earnings and revenue beat ratio of 86.7% each is impressive too.

The sector is caught in a broad market sell-off this year. 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) are down 8.1%, 4.7% and 15.7%, respectively. The dips seem to be solid buying opportunities, given that these products currently have a Zacks ETF Rank #2 (Buy), suggesting their outperformance in the months ahead (see: all the Industrials ETFs here).

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) topped estimates on both revenues and earnings. Earnings of $3.05 per share were 18 cents ahead of the consensus mark and the top line of $24.38 billion came in above the estimated $23.9 billion.

Major railroads Union Pacific (UNP - Free Report) and Norfolk Southern Corp (NSC - Free Report) also came up with better-than-expected earnings. Union Pacific outpaced the consensus earnings estimate by a couple of cents and the revenue estimate by $50 million. Norfolk topped the earnings estimate by a couple of cents and the revenue estimate by $96 million.

U.S. airlines Delta Air Lines (DAL - Free Report) delivered better-than-expected results while United Continental (UAL - Free Report) lagged. Delta reported loss per share of $1.23, narrower than the Zacks Consensus Estimate of a loss of $1.28 per share. Revenues of $9.35 billion topped the consensus mark of $9 billion. United Continental posted a loss of $4.24 per share, more than the Zacks Consensus Estimate of a loss of $4.19. Revenues of $7.57 billion came in below the estimated $7.68 billion (read: Should You Buy Travel Stocks & ETFs Now?).

Last but not the least, leading trucking carrier J.B. Hunt (JBHT - Free Report) beat the estimates for earnings by 38 cents per share and for revenues by $223 million.

ETFs in Focus

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

iShares U.S. Transportation ETF tracks the S&P Transportation Select Industry FMC Capped Index, giving investors exposure to a small basket of 52 securities. The in-focus six firms make up for a combined 50.7% share. From a sector perspective, railroads, and air freight & logistics take the largest share at 30.7% and 30.6%, respectively, while trucking and airlines round off the next two spots with a double-digit exposure each (read: Manufacturing Slows Again in April: Sector ETFs at Better Spots).

iShares U.S. Transportation ETF has accumulated $1.2 billion in its asset base and sees a solid trading volume of around 315,000 shares a day. It charges 41 bps in annual fees.

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

SPDR S&P Transportation ETF tracks the S&P Transportation Select Industry Index, holding 52 stocks in its basket. The in-focus firms account for around 2% share each. About 35% of the portfolio is dominated by trucking, while airlines, and air freight & logistics take 32% and 19% share, respectively.

With AUM of $761.3 million, SPDR S&P Transportation ETF charges 35 bps in fees per year from its investors and trades in a volume of around 92,000 shares a day.

First Trust Nasdaq Transportation ETF (FTXR - Free Report)

First Trust Nasdaq Transportation ETF 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 six firms represent a combined 26.9% share. Railroads, trucking, auto parts and automobiles are the top sectors accounting for double-digit exposure each.

First Trust Nasdaq Transportation ETF has amassed $176.8 million in its asset base and charges 60 bps in annual fees. The average trading volume is good at 682,000 shares.