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A Look at Transport ETFs Post Q2 Earnings

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The second-quarter earnings picture for the transportation sector has been unimpressive. Earnings of 88.3% of the market capitalization of the sector declined 9.8% on a 3.9% revenue decline. The earnings and revenue beat ratios came in at 75% and 33.3%, respectively. 

As such, transportation ETFs have seen rough trading over the past month. iShares U.S. Transportation ETF (IYT - Free Report) , First Trust Nasdaq Transportation ETF (FTXR - Free Report) and SPDR S&P Transportation ETF (XTN - Free Report) have lost 5.7%, 9.3% and 5.7%, respectively. The latest global market rout also took a toll on the sector.

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 - Free Report) , returned to volume growth in the United States during the second quarter for the first time in nine quarters but failed to deliver enough on a turnaround plan to cut costs and increase volumes. The company reported earnings per share of $1.79, which missed the Zacks Consensus Estimate of $1.98 and declined 29.5% from the year-ago quarter. Revenues dropped 1% year over year to $21.8 billion and fell short of the Zacks Consensus Estimate of $22.31 billion. United Parcel revised its revenue guidance to $93 billion from $92-$94.5 billion for the year (read: UPS Tailspin Hits Transport ETFs: Should You Buy the Dip?). 

Major railroad company Norfolk Southern Corp (NSC - Free Report) reported better-than-expected results, while Union Pacific (UNP - Free Report) missed estimates on revenues. Norfolk topped the consensus estimate for earnings by 21 cents and the revenue estimate by $22 million. Union Pacific outpaced the earnings estimate by 4 cents but lagged the revenue estimate by $52 million.

U.S. airlines Delta Air Lines (DAL - Free Report) and United Airlines (UAL - Free Report) reported mixed results. Delta reported earnings per share of $2.36, missing the Zacks Consensus Estimate by a penny. Revenues of $16.7 billion edged past the consensus mark of $16.25 billion. United Airlines reported earnings per share of $4.14, beating the Zacks Consensus Estimate of $3.97. Revenues of $14.99 billion came in below the estimated $15.13 billion.

Last but not least, leading trucking carrier J.B. Hunt (JBHT - Free Report) missed estimates for earnings by 19 cents per share and for revenues by $107 million  (see: all the Industrials ETFs here).

ETFs in Focus

iShares U.S. Transportation ETF (IYT - Free Report)

iShares U.S. Transportation ETF tracks the S&P Transportation Select Industry FMC Capped Index, giving investors exposure to a small basket of 44 securities. The six in-focus firms make up a combined 41.1% share. From a sector perspective, rail transportation and air freight & logistics take the largest share at 28.9% and 21.5%, respectively, while cargo ground transportation, passenger ground transportation and passenger airlines round off the next three spots with double-digit exposure each. 

iShares U.S. Transportation ETF has accumulated $651.2 million in its asset base and charges 40 bps in annual fees. It has a Zacks ETF Rank #2 (Buy) with a High risk outlook.

SPDR S&P Transportation ETF (XTN - Free Report)

SPDR S&P Transportation ETF tracks the S&P Transportation Select Industry Index, holding 44 stocks in its basket. The in-focus firms account for at least 2% share each. About 33% of the portfolio is dominated by cargo ground transportation, while passenger airlines and air freight & logistics round off the next two with double-digit exposure each (read: 3 Sector ETFs & Stocks to Bet on July Jobs Data).

With AUM of $201.7 million, SPDR S&P Transportation ETF charges 35 bps in fees per year from its investors and has a Zacks ETF Rank #2 with a High risk outlook.

First Trust Nasdaq Transportation ETF (FTXR - Free Report)

First Trust Nasdaq Transportation ETF offers exposure to the 41 most-liquid U.S. transportation securities based on volatility, value and growth by tracking the Nasdaq US Smart Transportation Index. The in-focus six firms represent a combined 23.8% share. Automobiles, delivery services, airlines, and railroads are the top sectors, accounting for double-digit exposure each. 

First Trust Nasdaq Transportation ETF has amassed $35.1 million in its asset base and charges 60 bps in annual fees. FTXR has a Zacks ETF Rank #2.

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