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Transport ETFs at a Glance Post Q2 Earnings

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The transportation sector saw some pullbacks this earnings season with stock prices dipping 0.3% (aggregate one-day stock market reaction to earnings releases) in response to earnings announcements.

Total earnings of 100% of the sector’s market capitalization that has been reported so far is up 5.1% on revenue growth of 4%. Earnings and revenue beat ratios of 86.7% and 40%, respectively, are encouraging as most industry players managed to beat on either earnings or revenues or on both counts (see: all the Industrials ETFs here).

For a better understanding, let’s dig into the earnings results of some well-known industry players:

Transportation Earnings in Focus

The world's largest package delivery company United Parcel Service’s (UPS - Free Report) top and the bottom line beat the Zacks Consensus Estimate. Earnings of $1.96 were 3 cents ahead of the consensus mark while revenues of $18.04 billion edged past the estimated $17.96 billion. For 2019, the company expects earnings per share in the range of $7.45-$7.75. The Zacks Consensus Estimate at the time of earnings release was pegged at $7.46.

Major railroads Union Pacific (UNP - Free Report) and Kansas City Southern (KSU - Free Report) delivered better-than-expected earnings as well as revenues while Norfolk Southern Corp (NSC - Free Report) missed on the same. Union Pacific’s earnings outpaced estimates by 10 cents while the same at Kansas City topped the mark by 4 cents. Revenues trumped the Zacks Consensus Estimate by $36 million and $10 million, respectively. Meanwhile, earnings of $2.70 at Norfolk Southern missed the Zacks Consensus Estimate by 7 cents and revenues of $2.93 billion marginally came below the consensus estimate by $4 million.

U.S. airlines Delta Air Lines (DAL - Free Report) and United Continental (UAL - Free Report) also beat on both earnings and revenues. Earnings and revenues at Delta edged past the Zacks Consensus Estimate by 6 cents and $62 million, respectively. At United Continental, earnings of $4.21 and revenues of $11 billion exceeded the Zacks Consensus Estimate of $4.04 and $11.36 billion, respectively (read: Time to Buy Airlines ETF on Mixed-to-Upbeat Earnings?).

For 2019, Delta raised its earnings per share guidance to $6.75-$7.25 from $6-$7. The Zacks Consensus Estimate was pegged at $6.93 per share at the time of earnings release. United Continental tapered its full-year earnings outlook by lifting the lower end of the range from $10-$12 to $10.5-$12. The Zacks Consensus Estimate at the time of earnings release stands at $11.20 per share.

Last but not the least, earnings of the leading trucking carrier J.B. Hunt (JBHT - Free Report) surpassed the Zacks Consensus Estimate by a couple of cents. However, revenues of $2.26 billion marginally fell short of the consensus estimate of $2.28 billion.

ETFs in Focus

Decent results have led to mixed trading in transportation ETFs over the past month. SPDR S&P Transportation ETF (XTN - Free Report) has inched up 1.2% while iShares Dow Jones Transportation Average Fund (IYT - Free Report) and First Trust Nasdaq Transportation ETF (FTXR - Free Report) have slipped 0.6% and 3.8%, respectively.

XTN

This fund tracks the S&P Transportation Select Industry Index holding 43 stocks in its basket. The in-focus firms account for more than 2% share each. Further, about 34.7% of the portfolio is dominated by trucking while airlines, and air freight & logistics take around one-fourth share each. With AUM of $140.5 million, the fund charges 35 bps in fees per year from investors and trades in a lower volume of around 13,000 shares a day. It has a Zacks ETF Rank #4 (Sell) with a High risk outlook.

IYT

The fund tracks the Dow Jones Transportation Average Index giving investors exposure to a small basket of 20 securities. The in-focus six of the seven firms make up for the top 10 holdings with a combined 45.7% share while Delta Airlines accounts for 3.5% share. From a sector perspective, railroads, and air freight & logistics take the largest share with 31.7% and 25.9% share, respectively, while airlines and trucking round off the next two spots with double-digit exposure each. The fund has accumulated nearly $538.8 million in AUM and sees solid trading volume of around 255,000 shares a day. It charges 43 bps in annual fees and has a Zacks ETF Rank #4 with a High risk outlook (read: Transport ETFs in Focus on FedEx Earnings Beat).

FTXR

This fund 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 seven firms represent a combined 32.2% share. Ground freight & logistics takes the top spot at 29.5% while airlines, auto & Truck manufacturers as well as auto, truck & motorcycle parts round off the next three. FTXR has accumulated $2.3 million in its asset base and charges 60 bps in annual fees. Average trading volume amounts to meager 4,000 shares. FTXR has a Zacks ETF Rank #4.

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