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Transport ETFs in Focus on FedEx Earnings Beat

Sweta Killa

After the closing bell yesterday, transport bellwether FedEx FDX reported robust fourth-quarter fiscal 2019 earnings. Although the courier company’s bottom line topped the Zacks Consensus Estimateit warned weakness in global demand and trade tensions will continue to weigh on the FedEx Express business (read: Go for Safe-Haven ETFs Amid Rising Geopolitical Risks).

Earnings per share came in at $5.01, trumping the Zacks Consensus Estimate by 20 cents but declining from the year-ago earnings of $5.91. Revenues rose 3% year over year to $17.81 billion but were in line with the consensus mark. For fiscal 2020, FedEx projects a low-single-digit percentage point increase in earnings per share before taking into account the effects of mark-to-market retirement plan accounting adjustments.

Following the mixed results, shares of FDX inched up 0.7% at the close in after-hours trading. FedEx has a Rank #3 (Hold) and an impressive VGM Score of A. It currently falls under a top-ranked Zacks industry (top 42%).

ETFs in Focus

The FedEx report has put transport ETFs — iShares Dow Jones Transportation Average Fund IYT, SPDR S&P Transportation ETF XTN and First Trust Nasdaq Transportation ETF FTXR — in focus. All these funds currently have a Zacks ETF Rank #4 (Sell) (see: all the Industrials ETFs here).

IYT

The ETF tracks the Dow Jones Transportation Average Index, giving investors exposure to a small basket of 20 securities. Of these, FedEx occupies the third position in the basket with 9.6% of the assets. Within the transportation sector, railroads, and air freight and logistics take the top two spots with 33.2% and 24.9% share, respectively, while airlines (18.3%) and trucking (16.7%) round off the next two. The fund has accumulated nearly $541.3 million in AUM while it sees a good trading volume of around 258,000 shares a day. It charges 43 bps in fees per year.

XTN

This fund follows the S&P Transportation Select Industry Index and uses almost an equal weight methodology for each security. Holding 43 stocks with AUM of $142.7 million, FedEx accounts for 2.6% share in the basket. The product is heavily exposed to trucking, which represents one-third of the portfolio while airlines and air freight & logistics also make up for 25.3% and 21.7%, share, each. The fund charges 35 bps in fees per year from investors and trades in a light volume of about 15,000 shares a day (read: A Look at Transport ETFs After Q1 Earnings).

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. FedEx holds 0.6% share in the basket. FTXR has amassed $7 million in its asset base and charges 60 bps in annual fees. Average trading volume is meager at 2,000 shares.

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SPDR S&P Transportation ETF (XTN): ETF Research Reports
 
iShares Transportation Average ETF (IYT): ETF Research Reports
 
FedEx Corporation (FDX) : Free Stock Analysis Report
 
First Trust NASDAQ Transportation ETF (FTXR): ETF Research Reports
 
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