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3 Transportation Stocks Poised to Beat on Earnings in Q2

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The widely diversified Zacks Transportation sector, which includes airlines, railroads, trucking and shipping companies, among others, is being aided by improved freight market conditions and a recovery in air-travel demand. However, supply-chain disruptions and rising fuel costs are hurting operations of some of the sector participants.  

Despite headwinds, several companies put up solid performances in the second quarter of 2022, reporting better-than-expected earnings and revenues. Their top and bottom lines also significantly improved on a year-over-year basis. Those yet to report second-quarter earnings numbers are Kirby Corporation (KEX - Free Report) , Southwest Airlines Co. (LUV - Free Report) and Schneider National, Inc. (SNDR - Free Report) , to name a few.

What’s in Store for Yet-to-Report Companies?

With improved air-travel demand, passenger revenues are expected to have increased significantly in the to-be-reported quarter from the year-ago period’s actuals, thus benefiting the results of airline companies in the sector.

The second-quarter performances of shipping companies are likely to have benefited from the northward movement in trading volumes. Most shipping stocks are being well-served by the bullishness surrounding the dry bulk market. Increased fleet utilization, driven by an uptick in world trade, is supporting growth of the dry bulk shipping stocks.

The transportation and logistics companies are anticipated to have benefited from new business growth as well as favorable revenues and network management. Impressive freight market conditions are likely to have aided the June-quarter performance of the trucking companies in the sector.

However, escalating expenses, mainly due to high purchased transportation costs and salaries, wages and benefits expenses, are likely to have hurt the bottom-line results of the transportation and logistics companies.

With fuel expenses representing a major input cost for the transportation companies, escalating fuel prices (due to the Russia-Ukraine war) are expected to have dented the bottom lines of these companies in the second quarter.

How to Pick Winners?

Given the large number of players operating in the transportation space, picking the right stocks is not an easy task. But our proven model makes it fairly simple. One can shortlist with the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold), which increases the odds of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

You can uncover the best stocks to buy or sell before they report earnings with our Earnings ESP Filter.

Earnings ESP — the percentage difference between the Most Accurate Estimate and the Zacks Consensus Estimate — is our proprietary methodology for determining the stocks with maximum chances of delivering positive earnings surprises in their next announcements. Our research shows that for stocks with this perfect combination, chances of a beat are as high as 70%.

Our Choices

Below we list three transportation stocks that have the right mix of elements to pull off positive surprises this earnings season.

Kirby has an Earnings ESP of +0.70% and a Zacks Rank #3, currently. KEX is set to release second-quarter results on Jul 28.  

Kirby Corporation Price and EPS Surprise

Kirby Corporation Price and EPS Surprise

Kirby Corporation price-eps-surprise | Kirby Corporation Quote

Favorable market conditions, such as high refinery and petrochemical plant utilization, increased volumes from new petrochemical plants and minimal new barge construction, are likely to have improved barge utilization. Both the distribution and services segments are likely to have benefited from an improved performance in the oil and gas, and the commercial and industrial markets.

However, increased costs are likely to have hurt Kirby’s bottom-line results.

Southwest Airlines has an Earnings ESP of +5.01% and a Zacks Rank of 3 at present. LUV will release second-quarter earnings numbers on Jul 28.  Owing to the betterment in air-travel demand, LUV anticipates second-quarter load factor (% of seats filled with passengers) in the range of 85-87%. Operating revenues are estimated to increase 12-15% in the second quarter from the 2019 level. However, reduced capacity, mainly due to staffing woes, is pushing up the unit costs for Southwest Airlines. This might get reflected in LUV’s bottom-line results.

Southwest Airlines Co. Price and EPS Surprise

Southwest Airlines Co. Price and EPS Surprise

Southwest Airlines Co. price-eps-surprise | Southwest Airlines Co. Quote

Moreover, rising fuel prices, thanks to the Russia-Ukraine war, are likely to have dented LUV’s bottom line in the June quarter. The Zacks Consensus Estimate for second-quarter fuel costs per gallon (inclusive of fuel tax: economic) suggests a 38.3% rise from the first-quarter 2022 reported number.

Schneider National has an Earnings ESP of +3.35% and is currently Zacks #3 Ranked. SNDR will announce second-quarter financial numbers on Jul 28. Solid performance in the Truckload, Intermodal and Logistics segments is likely to have driven Schneider National’s second-quarter 2022 results.

Escalating operating expenses might have hurt its bottom-line results.

Schneider National, Inc. Price and EPS Surprise

Schneider National, Inc. Price and EPS Surprise

Schneider National, Inc. price-eps-surprise | Schneider National, Inc. Quote

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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Southwest Airlines Co. (LUV) - free report >>

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Schneider National, Inc. (SNDR) - free report >>