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The Zacks Analyst Blog Highlights Union Pacific, Norfolk Southern, Southwest Airlines and American Airlines
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For Immediate Release
Chicago, IL – July 24, 2024 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Union Pacific (UNP - Free Report) , Norfolk Southern (NSC - Free Report) , Southwest Airlines (LUV - Free Report) and American Airlines (AAL - Free Report) .
Here are highlights from Tuesday’s Analyst Blog:
Can These 4 Transportation Stocks Hit Q2 Earnings Targets?
The widely diversified Zacks Transportation sector is facing multiple headwinds, ranging from inflation-induced elevated interest rates and weak freight demand to supply-chain woes. Geopolitical uncertainties and higher inflation continue to hurt consumer sentiment and growth expectations.
Although inflation is cooling, the reading continues to be above the Fed's long-term goal. As a result, the Fed is expected to hold interest rates higher for longer. Elevated interest rates do not bode well for the economy, as the same curtails consumer outlays and increases borrowing costs.
Apart from high interest rates, the freight market downturn, driven by excess freight capacity than freight volumes, has hit the sector hard.
However, the decline in expenses on fuel represents another tailwind for the industry. Notably, oil prices declined almost 1.9% in the April-June 2024 period. As fuel expenses represent a key input cost for any transportation player, the decline in oil prices bodes well for the bottom-line growth of railroad stocks.
Improvement in the demand scenario from the pandemic lows is a major positive. The uptick in trading volumes is likely to have aided the performance of transportation companies in the soon-to-be-reported quarter.
Against this backdrop, investors interested in the Zacks Transportation sector are keenly waiting for the second-quarter 2024 results of Union Pacific, Norfolk Southern, Southwest Airlines and American Airlines, scheduled to be released on Jul 25, 2024.
Our quantitative model predicts an earnings beat for a company if it has a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). This combination increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Let's delve deeper.
Union Pacific is grappling with a freight market downturn. Below-par freight rates are hurting Union Pacific's prospects. To mitigate the revenue decline from the freight downturn, Union Pacific focuses on cost-cutting measures to improve its bottom line in the second quarter.
The Zacks Consensus Estimate for UNP's soon-to-be reported quarter's earnings has been revised downward by 2.17% in the past 60 days to $2.70 per share. The Zacks Consensus Estimate for revenues is pegged at $6.06 billion, which indicates growth of 1.62% from the year-ago levels.
Weak freight conditions are likely to have hurt Norfolk Southern's top line in the to-be-reported quarter. Further, inflation-related woes are likely to have brought about a reduction in consumer demand for goods, in turn affecting freight volumes hauled by rail.
The Zacks Consensus Estimate for revenues is pegged at $3.02 billion, indicating a 1.42% rise from the year-ago reported level. The top line is likely to have been affected by the performances of all three key segments — Merchandise, Intermodal and Coal.
Moreover, the northward movement in operating expenses (driven by the increase in labor costs) is likely to have adversely impacted NSC's bottom line in the second quarter of 2024. The Zacks Consensus Estimate for Norfolk Southern's soon-to-be reported quarter's earnings has been revised downward by 3.71% in the past 60 days to $2.85 per share.
Our proven model does not conclusively predict an earnings beat for NSC this earnings season. NSC has an Earnings ESP of -0.00% and a Zacks Rank #4 (Sell) at present. When the second-quarter 2024 earnings preview article was issued, NSC had an Earnings ESP of -1.80% and a Zacks Rank of 4.
Southwest Airlines expects its second-quarter capacity or available seat miles (ASMs) to improve 8-9% from the year-ago reported figure. For third-quarter 2024, LUV anticipates capacity to increase in the low-single digits, and for the fourth quarter of 2024, LUV expects capacity to decrease in the low to mid-single digits. For 2024, management has reaffirmed its capacity expectation to improve 4% on a year-over-year basis.
The Zacks Consensus Estimate for LUV's second-quarter 2024 revenues is pegged at $7.35 billion, indicating 4.45% year-over-year growth. The top line is likely to have been aided by healthy leisure demand and continued yield strength.
Higher expenses and interest expenses are likely to weigh on LUV's bottom line. Notably, the Zacks Consensus Estimate for LUV's second-quarter 2024 earnings has been revised downward by 36.2% in the past 90 days to 51 cents per share. Moreover, the consensus mark implies a 53.21% decline from the year-ago actuals.
Our proven model does not conclusively predict an earnings beat for Southwest Airlines this season as it has an Earnings ESP of -22.71% and a Zacks Rank #4 at present.
American Airlines' top-line performance in the second quarter is expected to have benefited from upbeat air-travel demand, particularly on the domestic front. Passenger revenues, which account for the bulk of the top line, are likely to have been high, in turn strengthening total revenues.
The Zacks Consensus Estimate for second-quarter 2024 revenues is currently pegged at $14.42 billion, indicating a 2.60% uptick from the year-ago actuals. The Zacks Consensus Estimate for AAL's second-quarter 2024 earnings is currently pegged at $1.04 per share and has been revised downward by 20.61% in the past 60 days. Additionally, the consensus mark implies a 45.83% decline from the year-ago actuals.
Our proven model does not conclusively predict an earnings beat for AAL this season as it has an Earnings ESP of -0.52% and a Zacks Rank #5 (Strong Sell) at present.
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
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The Zacks Analyst Blog Highlights Union Pacific, Norfolk Southern, Southwest Airlines and American Airlines
For Immediate Release
Chicago, IL – July 24, 2024 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Union Pacific (UNP - Free Report) , Norfolk Southern (NSC - Free Report) , Southwest Airlines (LUV - Free Report) and American Airlines (AAL - Free Report) .
Here are highlights from Tuesday’s Analyst Blog:
Can These 4 Transportation Stocks Hit Q2 Earnings Targets?
The widely diversified Zacks Transportation sector is facing multiple headwinds, ranging from inflation-induced elevated interest rates and weak freight demand to supply-chain woes. Geopolitical uncertainties and higher inflation continue to hurt consumer sentiment and growth expectations.
Although inflation is cooling, the reading continues to be above the Fed's long-term goal. As a result, the Fed is expected to hold interest rates higher for longer. Elevated interest rates do not bode well for the economy, as the same curtails consumer outlays and increases borrowing costs.
Apart from high interest rates, the freight market downturn, driven by excess freight capacity than freight volumes, has hit the sector hard.
However, the decline in expenses on fuel represents another tailwind for the industry. Notably, oil prices declined almost 1.9% in the April-June 2024 period. As fuel expenses represent a key input cost for any transportation player, the decline in oil prices bodes well for the bottom-line growth of railroad stocks.
Improvement in the demand scenario from the pandemic lows is a major positive. The uptick in trading volumes is likely to have aided the performance of transportation companies in the soon-to-be-reported quarter.
Against this backdrop, investors interested in the Zacks Transportation sector are keenly waiting for the second-quarter 2024 results of Union Pacific, Norfolk Southern, Southwest Airlines and American Airlines, scheduled to be released on Jul 25, 2024.
Our quantitative model predicts an earnings beat for a company if it has a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). This combination increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter.
Let's delve deeper.
Union Pacific is grappling with a freight market downturn. Below-par freight rates are hurting Union Pacific's prospects. To mitigate the revenue decline from the freight downturn, Union Pacific focuses on cost-cutting measures to improve its bottom line in the second quarter.
The Zacks Consensus Estimate for UNP's soon-to-be reported quarter's earnings has been revised downward by 2.17% in the past 60 days to $2.70 per share. The Zacks Consensus Estimate for revenues is pegged at $6.06 billion, which indicates growth of 1.62% from the year-ago levels.
Our proven model does not conclusively predict an earnings beat for UNP this earnings season as it has an Earnings ESP of -0.16% and a Zacks Rank #3 at present. When the second-quarter 2024 earnings preview article was issued, UNP had an Earnings ESP of -0.49% and a Zacks Rank of 3. You can see the complete list of today's Zacks #1 Rank stocks here.
Weak freight conditions are likely to have hurt Norfolk Southern's top line in the to-be-reported quarter. Further, inflation-related woes are likely to have brought about a reduction in consumer demand for goods, in turn affecting freight volumes hauled by rail.
The Zacks Consensus Estimate for revenues is pegged at $3.02 billion, indicating a 1.42% rise from the year-ago reported level. The top line is likely to have been affected by the performances of all three key segments — Merchandise, Intermodal and Coal.
Moreover, the northward movement in operating expenses (driven by the increase in labor costs) is likely to have adversely impacted NSC's bottom line in the second quarter of 2024. The Zacks Consensus Estimate for Norfolk Southern's soon-to-be reported quarter's earnings has been revised downward by 3.71% in the past 60 days to $2.85 per share.
Our proven model does not conclusively predict an earnings beat for NSC this earnings season. NSC has an Earnings ESP of -0.00% and a Zacks Rank #4 (Sell) at present. When the second-quarter 2024 earnings preview article was issued, NSC had an Earnings ESP of -1.80% and a Zacks Rank of 4.
Southwest Airlines expects its second-quarter capacity or available seat miles (ASMs) to improve 8-9% from the year-ago reported figure. For third-quarter 2024, LUV anticipates capacity to increase in the low-single digits, and for the fourth quarter of 2024, LUV expects capacity to decrease in the low to mid-single digits. For 2024, management has reaffirmed its capacity expectation to improve 4% on a year-over-year basis.
The Zacks Consensus Estimate for LUV's second-quarter 2024 revenues is pegged at $7.35 billion, indicating 4.45% year-over-year growth. The top line is likely to have been aided by healthy leisure demand and continued yield strength.
Higher expenses and interest expenses are likely to weigh on LUV's bottom line. Notably, the Zacks Consensus Estimate for LUV's second-quarter 2024 earnings has been revised downward by 36.2% in the past 90 days to 51 cents per share. Moreover, the consensus mark implies a 53.21% decline from the year-ago actuals.
Our proven model does not conclusively predict an earnings beat for Southwest Airlines this season as it has an Earnings ESP of -22.71% and a Zacks Rank #4 at present.
American Airlines' top-line performance in the second quarter is expected to have benefited from upbeat air-travel demand, particularly on the domestic front. Passenger revenues, which account for the bulk of the top line, are likely to have been high, in turn strengthening total revenues.
The Zacks Consensus Estimate for second-quarter 2024 revenues is currently pegged at $14.42 billion, indicating a 2.60% uptick from the year-ago actuals. The Zacks Consensus Estimate for AAL's second-quarter 2024 earnings is currently pegged at $1.04 per share and has been revised downward by 20.61% in the past 60 days. Additionally, the consensus mark implies a 45.83% decline from the year-ago actuals.
Our proven model does not conclusively predict an earnings beat for AAL this season as it has an Earnings ESP of -0.52% and a Zacks Rank #5 (Strong Sell) at present.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.