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The second-quarter reporting cycle is in full swing with multiple companies unveiling their quarterly financial numbers every day. The picture that has emerged so far is quite encouraging with a high proportion of companies reporting better-than-expected earnings per share in the current reporting cycle.

In fact, this healthy picture is unlikely to fade, with the Earnings Preview suggesting that stocks in the much sought-after S&P 500 Index will end the current reporting cycle with bottom-line expansion of 9.2%. The same set of companies is projected to witness top-line growth to the tune of 5%.

Notably, 11 of the 16 Zacks sectors are expected to end second-quarter in the green as far as bottom-line expansion is concerned. One such sector is the highly diversified Transportation sector. Significantly, multiple tailwinds like an improved economy, a better job market scenario and better unit revenue trends have contributed to this bullish picture for the sector.

In addition, with most of the sub-groups of the Zacks Transportation sector being placed in the top 50% of the Zacks ranked industries, the sector’s prospects look bright. Our back-testing also shows that the top 50% of the Zacks ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

In fact, airline companies that form an integral part of the transportation sector are well on their way to overcoming their unit revenue issues, which had plagued them for quite some time. Moreover, railroads are thriving on the back of an improved coal scenario among other tailwinds.

Consequently, we have seen key railroads like Union Pacific Corporation (UNP) and CSX Corporation (CSX) reporting better-than-expected revenues as well as earnings per share in the second quarter.

Bullish Run of Transports Likely to Continue

With the sector back in favor, it is likely that quite a few of the transportation companies that have not yet disclosed their quarterly numbers will come out with flying colors in the current reporting cycle. Given this bullish backdrop, it seems to be a prudent idea to add such stocks to one’s portfolio now.

We note that the participants from this space are likely to end the quarter with the top and the bottom line expanding 10% and 9.4%, respectively. Both these figures compare favorably with the readings in the previous quarter, when revenues increased 6.9% and earnings contracted 17.8%.

How to Make the Right Choice?

However, with multiple companies present in the transportation space, the task of selecting the right stocks is by no means an easy one. The process is akin to searching for a needle in a haystack, unless one is aware of an appropriate method to make the right choice.

One way to narrow down the list of choices is by looking at stocks with a favorable Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 (Hold) and a positive Earnings ESP.

Earnings ESP is our proprietary methodology to determine which stocks have the best chance to surprise in their next earnings announcement. It shows the percentage difference between the Most Accurate estimate and the Zacks Consensus Estimate. Our research shows that for stocks with this combination have the chance of a positive earnings surprise is as high as 70%. An earnings beat boosts investor confidence in the stock, which is reflected in its rapid price appreciation. You can uncover the best stocks to buy or sell before they report with our Earnings ESP Filter.

5 Attractive Picks

With the aid of the above methodology, we have zeroed in on five transportation stocks that are likely to report better-than-expected earnings per share in the second quarter. We believe that these stocks could turn out to be great additions to your portfolio and are worth a look.

Copa Holdings (CPA - Free Report) is a leading Latin American airliner. It has an Earnings ESP of +4.29%, as the Most Accurate estimate of $1.46 per share is above the Zacks Consensus Estimate by $0.06. The company carries a Zacks Rank #2. The favorable combination makes an earnings beat likely in the quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.

This Panama City-based carrier, which is scheduled to report results on Aug 9, has been an impressive performer this year with its shares surging more than 38% year to date. The carrier has a robust earnings history and has outpaced the Zacks Consensus Estimate in three of the last four quarters with an average beat of 33.65%.

LATAM Airlines Group S.A. (LTM - Free Report) , based in Santiago, Chile, offers domestic and international passenger and cargo air services. The company carries a Zacks Rank #2 and has an Earnings ESP of +200%. The favorable combination makes an earnings beat likely in the quarter. Results should be out on Aug 17.

Star Bulk Carriers Corp. (SBLK - Free Report) is a Greece-based leading global shipping company in the dry bulk sector. The carrier has an Earnings ESP of +20% and Zacks Rank #3.  The company is scheduled to reveal its results on Aug 8. Shares of the company have skyrocketed more than 100% year to date.

Teekay Tankers Ltd. (TNK - Free Report) provides marine transportation of crude oil. The company carries a Zacks Rank #2 and an Earnings ESP of +25%. The company is scheduled to reveal its results on Aug 3.

GasLog Ltd. (GLOG - Free Report) operates under two segments – vessel ownership and management of Liquefied Natural Gas (LNG). The company has an Earnings ESP of +200% and carries a Zacks Rank #3.  It is scheduled to reveal its results on Aug 3.

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