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Mixed Q1 Earnings Put Transport ETFs in Focus

The first-quarter earnings picture for the transportation sector has been dismal so far. This is especially true as total earnings for the sector that have been reported so far are down 181.3% on 7.8% lower revenues. This is reflective of continued operating woes in the airline space, which has been hit hard by the resurgence in COVID-19 infections.

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 the estimates on both revenues and earnings. Earnings of $2.77 per share were $1.10 ahead of the consensus mark and the top line of $22.9 billion came in above the estimated $20.4 billion.

Major railroads Union Pacific UNP and Kansas City KSU missed estimates. Union Pacific lagged the earnings estimate by 6 cents and the revenue estimate by $35 million. Kansas City fell short of the earnings estimate by 9 cents and revenue estimate by $1 million. On the other hand, Norfolk Southern Corp NSC topped the earnings estimate by 11 cents and the revenue estimate by $25 million.

U.S. airlines Delta Air Lines DAL and United Continental UAL delivered worse-than-expected results. Delta incurred a loss of $3.55 per share, wider than the Zacks Consensus Estimate of a loss of $3.08. Revenues of $4.15 billion topped the consensus mark of $3.82 billion. United posted a loss of $7.50 per share, wider than the Zacks Consensus Estimate of a loss of $6.97 and revenues of $3.22 billion came in slightly below the estimated $3.25 billion (read: Airlines Earnings Mixed: What Lies ahead of ETF?).

Last but not the least, leading trucking carrier J.B. Hunt JBHT beat estimates for earnings by 19 cents per share and revenues by $132 million.

ETFs in Focus

The Q1 earnings reports have led to volatile trading in transport ETFs over the past month. As such, iShares Dow Jones Transportation Average Fund IYT, SPDR S&P Transportation ETF XTN and First Trust Nasdaq Transportation ETF FTXR have gained 4.6%, 0.7% and 0.2%, respectively. However, 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 Dow Jones Transportation Average Index, giving investors exposure to a small basket of 20 securities. The in-focus seven firms make up for a combined 46.5% share. From a sector perspective, railroads, and air freight & logistics take the largest share at 28.3% and 25.8%, respectively, while trucking and airlines round off the next two spots with a double-digit exposure each. The fund has accumulated $2.1 billion in its asset base and sees a solid trading volume of around 198,000 shares a day. It charges 42 bps in annual fees.

XTN

This fund tracks the S&P Transportation Select Industry Index, holding 41 stocks in its basket. The in-focus firms account for less than 3.5% share each. Further, 32.9% of the portfolio is dominated by trucking while airlines, and air freight & logistics take around another one-fourth share each. With AUM of $651.3 million, the fund charges 35 bps in fees per year from investors and trades in a lower volume of around 149,000 shares a day (read: Winning Sector ETFs on Biden's First 100 Days of Ruling).

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 25.7% share. Trucking takes the top spot at 19.2% while railroads and transportation services round off the next spots with a double-digit exposure each. FTXR has amassed $1.1 billion in its asset base and charges 60 bps in annual fees. The average trading volume is a modest 136,000 shares.

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Union Pacific Corporation (UNP): Free Stock Analysis Report
 
Kansas City Southern (KSU): Free Stock Analysis Report
 
United Parcel Service, Inc. (UPS): Free Stock Analysis Report
 
Delta Air Lines, Inc. (DAL): Free Stock Analysis Report
 
Norfolk Southern Corporation (NSC): Free Stock Analysis Report
 
United Airlines Holdings Inc (UAL): Free Stock Analysis Report
 
J.B. Hunt Transport Services, Inc. (JBHT): Free Stock Analysis Report
 
ISHARS-TRAN AVG (IYT): ETF Research Reports
 
SPDR-SP TRANSPT (XTN): ETF Research Reports
 
FT-NDQ TRANSPRT (FTXR): ETF Research Reports
 
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