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The Zacks Analyst Blog Highlights: United Continental, Spirit Airlines, Union Pacific, Norfolk Southern and FedEx
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For Immediate Release
Chicago, IL – Dec 22, 2017 – 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 United Continental (UAL - Free Report) , Spirit Airlines (SAVE - Free Report) , Union Pacific Corp. (UNP - Free Report) , Norfolk Southern Corp. (NSC - Free Report) and FedEx Corp. (FDX - Free Report) .
5 Transportation Stocks that Escaped 2017 Sector Shortfall
It is a well-documented fact that the widely-diversified transportation sector, which includes airline companies, railroads, truckers and shippers to name a few, has had a turbulent time in 2017 due to multiple headwinds. Issues ranging from customer dissatisfaction, high fuel costs, driver shortages, technological glitches and service disruptions due to hurricanes have let sector participants down at various times of the year.
Let’s have a deeper look into the major headwinds that have hampered this sector.
Probably, the most infamous incident to have plagued the sector in 2017 was the David Dao incident at United Airlines, the wholly owned subsidiary of United Continental, on Apr 9. The passenger dragging episode drew flak from across the globe, resulting in multiple apologies from the company. Apart from United Airlines, customer dissatisfaction issues have also hurt other airline operators like Spirit Airlines.
The rise in fuel prices also do not bode well for transportation stocks as expenses related to the commodity are one of the largest input costs for any sector participant. In fact, oil prices have increased more than 37% in the last three months, hitting a more than two-year high of around $59 recently.
Additionally, the recent hurricanes disrupted operations of major sector participants. Consequently, airline operators like United Continental had to cancel multiple flights causing significant loss of revenues.
Hurricanes also hurt operations of major railroads like Union Pacific Corp. and Norfolk Southern Corp. by damaging important rail lines. Freight costs skyrocketed following the natural disasters. Railroads have also been negatively impacted this year by weakness in the automotive sector due to sluggish vehicle production in the United States.
In 2017, technological glitches have hurt sector participants as well. Operations at FedEx Corp.’s subsidiary, TNT Express, were crippled by a cyberattack in June. The attack caused large-scale service delays.
Due the above-mentioned headwinds, the Zacks transportation sector is currently placed at the bottom among the 16 Zacks Classified sectors.
S&P 500 Going from Strength to Strength
With the domestic economy on a solid footing, it is of little surprise that U.S. stock markets are hitting all-time highs on a fairly regular basis. The S&P 500 also maintained its upward journey for 13 straight months through November. The benchmark index, in fact, hasn’t seen a drop of at least 3% since Nov 7, 2016, the longest stretch on record. The index had rallied more than 19% so far this year and is on track to record its best year since 2013.
In fact, strong economic growth has been responsible for this upsurge in the S&P 500 Index. Bullish domestic data released recently are indicative of the healthy position of the U.S. economy.
Per the Commerce Department’s second estimate, the U.S. economy expanded at a 3.3% pace in the third quarter. This represents an improvement from the annualized growth rate of 3.1% in the April to June period and the strongest performance since the third quarter of 2014. Meanwhile, President Trump’s proposals to overhaul the tax law and make it business friendly, have added to the already buoyant scenario.
Transports Lag the S&P 500 Index
While the S&P 500 equity index has been on an uptrend, it has been a turbulent 2017 for the transportation stocks as enumerated above. Given this contrasting scenario, it is of little wonder that the sector has lagged the coveted S&P 500 Index.
The recent optimism surrounding the tax bill, which on becoming a law is expected to aid transports significantly, is primarily responsible for the sector giving positive returns to investors this year. Despite this, it has not been a great year for the sector participants due to the headwinds mentioned above.
The Zacks transportation sector rallied 10.9% year to date compared with the broader S&P 500's gain of 20.3%.
Sector Outperformers in 2017
Despite the headwinds to have plagued sector participants, there are a few stocks in the sector which have given higher returns than the sector.
However, given the widely diversified transportation sector, it is by no means an easy task for investors to arrive at such outperformers. To aid their search procedure, we have zeroed in on five such stocks.
The stocks, apart from having solid fundamentals, have large market capitalizations. This is because, focusing on such stocks is considered to be safe. Their large market capitalizations provide the requisite cushion to combat economic downturns and stringent credit conditions.
Our first choice is FedEx Corporation. This Zacks Rank #2 (Buy) company offers customers a one-stop source for global shipping, logistics and supply chain solutions. The company has an impressive expected earnings growth rate (next 3 to 5 years) of 12.8%. which is higher than the industry’s 11%.
The company has a market capitalization of $63.95 billion and a VGM Score of A. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners.
However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score. Additionally, the stock has returned 34.9% year to date. Impressive performance during the current holiday season will boost the stock further. (Looking for the Best Stocks for 2018? Be among the first to see our Top Ten Stocks for 2018 portfolio here.)
Our next choice is Union Pacific Corporation. This Zacks Rank #3 (Hold) railroad operator is based in Omaha, NE. As the largest railroad in North America, Union Pacific connects the Pacific and Gulf Coast ports with the Midwest and eastern United States gateways.
The stock has seen the Zacks Consensus Estimate for current-quarter and current-year earnings being revised 2% and 0.7% upward, respectively, over the last 60 days. Additionally, the stock has returned 29.9% year to date. The company has a market capitalization of $101.68 billion.
Moreover, railroads including Union Pacific are seeing good times under President Trump due to his pro-coal stance. Trump is aiming to revive the coal industry by relaxing regulations which were hurting its prospects. As fortunes of railroads are tied to coal, any positive development pertaining to the commodity is a boost for railroad operators.
Additionally, railroads invest significantly for capital expenditure as the industry is capital-intensive in nature. For example, Union Pacific has announced a $3.1 billion capital plan this year, which is in line with its efforts to promote safety and enhance productivity.
In the current scenario, capital expenditures cannot be tax-deducted in the year they are incurred. However, companies will be able to deduct their capital expenditures from taxable income immediately as per the provisions of the tax reform bill. Naturally, this aspect hugely favors railroads and if it materializes companies in the space would be huge gainers.
Our next choice is also a railroad operator — Norfolk Southern Corporation. This Zacks Rank #3 company is based in Norfolk, VA. The stock has seen the Zacks Consensus Estimate for current-quarter and current-year earnings being revised 2% and 1.7% upward, respectively, over the last 60 days. Additionally, the stock has returned 34% year to date. The company has a market capitalization of $40.31 billion.
We are impressed by Norfolk Southern’s focus on rewarding shareholders through share repurchases and dividends. The company's cost-cutting efforts to drive the bottom-line are also encouraging. The company expects earnings per share to grow in double digits (compound annual growth rate) by 2020.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year.See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
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: United Continental, Spirit Airlines, Union Pacific, Norfolk Southern and FedEx
For Immediate Release
Chicago, IL – Dec 22, 2017 – 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 United Continental (UAL - Free Report) , Spirit Airlines (SAVE - Free Report) , Union Pacific Corp. (UNP - Free Report) , Norfolk Southern Corp. (NSC - Free Report) and FedEx Corp. (FDX - Free Report) .
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Thursday’s Analyst Blog:
5 Transportation Stocks that Escaped 2017 Sector Shortfall
It is a well-documented fact that the widely-diversified transportation sector, which includes airline companies, railroads, truckers and shippers to name a few, has had a turbulent time in 2017 due to multiple headwinds. Issues ranging from customer dissatisfaction, high fuel costs, driver shortages, technological glitches and service disruptions due to hurricanes have let sector participants down at various times of the year.
Let’s have a deeper look into the major headwinds that have hampered this sector.
Probably, the most infamous incident to have plagued the sector in 2017 was the David Dao incident at United Airlines, the wholly owned subsidiary of United Continental, on Apr 9. The passenger dragging episode drew flak from across the globe, resulting in multiple apologies from the company. Apart from United Airlines, customer dissatisfaction issues have also hurt other airline operators like Spirit Airlines.
The rise in fuel prices also do not bode well for transportation stocks as expenses related to the commodity are one of the largest input costs for any sector participant. In fact, oil prices have increased more than 37% in the last three months, hitting a more than two-year high of around $59 recently.
Additionally, the recent hurricanes disrupted operations of major sector participants. Consequently, airline operators like United Continental had to cancel multiple flights causing significant loss of revenues.
Hurricanes also hurt operations of major railroads like Union Pacific Corp. and Norfolk Southern Corp. by damaging important rail lines. Freight costs skyrocketed following the natural disasters. Railroads have also been negatively impacted this year by weakness in the automotive sector due to sluggish vehicle production in the United States.
In 2017, technological glitches have hurt sector participants as well. Operations at FedEx Corp.’s subsidiary, TNT Express, were crippled by a cyberattack in June. The attack caused large-scale service delays.
Due the above-mentioned headwinds, the Zacks transportation sector is currently placed at the bottom among the 16 Zacks Classified sectors.
S&P 500 Going from Strength to Strength
With the domestic economy on a solid footing, it is of little surprise that U.S. stock markets are hitting all-time highs on a fairly regular basis. The S&P 500 also maintained its upward journey for 13 straight months through November. The benchmark index, in fact, hasn’t seen a drop of at least 3% since Nov 7, 2016, the longest stretch on record. The index had rallied more than 19% so far this year and is on track to record its best year since 2013.
In fact, strong economic growth has been responsible for this upsurge in the S&P 500 Index. Bullish domestic data released recently are indicative of the healthy position of the U.S. economy.
Per the Commerce Department’s second estimate, the U.S. economy expanded at a 3.3% pace in the third quarter. This represents an improvement from the annualized growth rate of 3.1% in the April to June period and the strongest performance since the third quarter of 2014. Meanwhile, President Trump’s proposals to overhaul the tax law and make it business friendly, have added to the already buoyant scenario.
Transports Lag the S&P 500 Index
While the S&P 500 equity index has been on an uptrend, it has been a turbulent 2017 for the transportation stocks as enumerated above. Given this contrasting scenario, it is of little wonder that the sector has lagged the coveted S&P 500 Index.
The recent optimism surrounding the tax bill, which on becoming a law is expected to aid transports significantly, is primarily responsible for the sector giving positive returns to investors this year. Despite this, it has not been a great year for the sector participants due to the headwinds mentioned above.
The Zacks transportation sector rallied 10.9% year to date compared with the broader S&P 500's gain of 20.3%.
Sector Outperformers in 2017
Despite the headwinds to have plagued sector participants, there are a few stocks in the sector which have given higher returns than the sector.
However, given the widely diversified transportation sector, it is by no means an easy task for investors to arrive at such outperformers. To aid their search procedure, we have zeroed in on five such stocks.
The stocks, apart from having solid fundamentals, have large market capitalizations. This is because, focusing on such stocks is considered to be safe. Their large market capitalizations provide the requisite cushion to combat economic downturns and stringent credit conditions.
Our first choice is FedEx Corporation. This Zacks Rank #2 (Buy) company offers customers a one-stop source for global shipping, logistics and supply chain solutions. The company has an impressive expected earnings growth rate (next 3 to 5 years) of 12.8%. which is higher than the industry’s 11%.
The company has a market capitalization of $63.95 billion and a VGM Score of A. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners.
However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM score. Additionally, the stock has returned 34.9% year to date. Impressive performance during the current holiday season will boost the stock further. (Looking for the Best Stocks for 2018? Be among the first to see our Top Ten Stocks for 2018 portfolio here.)
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Our next choice is Union Pacific Corporation. This Zacks Rank #3 (Hold) railroad operator is based in Omaha, NE. As the largest railroad in North America, Union Pacific connects the Pacific and Gulf Coast ports with the Midwest and eastern United States gateways.
The stock has seen the Zacks Consensus Estimate for current-quarter and current-year earnings being revised 2% and 0.7% upward, respectively, over the last 60 days. Additionally, the stock has returned 29.9% year to date. The company has a market capitalization of $101.68 billion.
Moreover, railroads including Union Pacific are seeing good times under President Trump due to his pro-coal stance. Trump is aiming to revive the coal industry by relaxing regulations which were hurting its prospects. As fortunes of railroads are tied to coal, any positive development pertaining to the commodity is a boost for railroad operators.
Additionally, railroads invest significantly for capital expenditure as the industry is capital-intensive in nature. For example, Union Pacific has announced a $3.1 billion capital plan this year, which is in line with its efforts to promote safety and enhance productivity.
In the current scenario, capital expenditures cannot be tax-deducted in the year they are incurred. However, companies will be able to deduct their capital expenditures from taxable income immediately as per the provisions of the tax reform bill. Naturally, this aspect hugely favors railroads and if it materializes companies in the space would be huge gainers.
Our next choice is also a railroad operator — Norfolk Southern Corporation. This Zacks Rank #3 company is based in Norfolk, VA. The stock has seen the Zacks Consensus Estimate for current-quarter and current-year earnings being revised 2% and 1.7% upward, respectively, over the last 60 days. Additionally, the stock has returned 34% year to date. The company has a market capitalization of $40.31 billion.
We are impressed by Norfolk Southern’s focus on rewarding shareholders through share repurchases and dividends. The company's cost-cutting efforts to drive the bottom-line are also encouraging. The company expects earnings per share to grow in double digits (compound annual growth rate) by 2020.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors.
Click here for Zacks' private trades >>
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1 Stock of the Day pick for free.
About Zacks Equity Research
Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.
Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year.See these high-potential stocks free >>.
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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.