Transport ETFs Rise Despite Disappointing Q3 Earnings

The third-quarter earnings picture for the transportation sector has been unimpressive. Earnings of the sector declined 0.1% on a 3.5% revenue decline. The earnings and revenue beat ratios came in at 72.7% and 40.9%, respectively. 

As such, transportation ETFs have seen solid trading over the past month. iShares U.S. Transportation ETF IYT, First Trust Nasdaq Transportation ETF FTXR and SPDR S&P Transportation ETF XTN have gained 8.9%, 13.4% and 13.2%, respectively. 

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 reported third-quarter 2024 earnings of $1.76 per share, which beat the Zacks Consensus Estimate of $1.65 and improved 12.1% year over year. Revenues of $22.25 billion fell short of the Zacks Consensus Estimate of $22.26 billion but increased 5.6% year over year. For 2024, UPS slashed its revenue guidance to around $91 billion from $93 billion. 

Major railroad company Norfolk Southern Corp NSC reported mixed results, while Union Pacific UNP missed estimates on both fronts. Norfolk topped the consensus estimate for earnings by 15 cents but missed the revenue estimate by $44 million. Union Pacific missed the earnings estimate by a penny and lagged the revenue estimate by $98 million.

U.S. airlines Delta Air Lines DAL reported mixed results, while United Airlines UAL reported strong results. Delta reported earnings per share of $1.50, missing the Zacks Consensus Estimate by 6 cents. Revenues of $15.68 billion edged past the consensus mark of $15.37 billion. United Airlines reported earnings per share of $3.33, beating the Zacks Consensus Estimate of $3.10. Revenues of $14.84 billion came in above the estimated $14.76 billion (read: Airlines ETF Hits New 52-Week High).

Last but not least, leading trucking carrier J.B. Hunt JBHT outpaced the consensus mark for earnings by 7 cents per share and for revenues by $31 million.

ETFs in Focus

iShares U.S. Transportation ETF (IYT)

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 takes the largest share at 24.7%, while cargo ground transportation, air freight & logistics, passenger airlines and passenger ground transportation round off the next three spots with double-digit exposure each. 

iShares U.S. Transportation ETF has accumulated $711.1 million in its asset base and charges 39 bps in annual fees. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

First Trust Nasdaq Transportation ETF (FTXR)

First Trust Nasdaq Transportation ETF offers exposure to the 40 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, airlines, railroads, commercial vehicle-equipment leasing, and delivery services are the top sectors, accounting for double-digit exposure each. 

First Trust Nasdaq Transportation ETF has amassed $33.7 million in its asset base and charges 60 bps in annual fees. FTXR has a Zacks ETF Rank #3.

SPDR S&P Transportation ETF (XTN)

SPDR S&P Transportation ETF tracks the S&P Transportation Select Industry Index, holding 44 stocks in its basket. The in-focus firms collectively account for 16.8% share. About 32% 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 (see: all the Industrials ETFs here).

With AUM of $239 million, SPDR S&P Transportation ETF charges 35 bps in fees per year from its investors and has a Zacks ETF Rank #3 with a High risk outlook.

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