Transport ETFs to Ride High on Huge Earnings Beat by FedEx
After the closing bell yesterday, transport bellwether FedEx FDX reported robust 2018 third-quarter earnings results. The courier company outpaced the Zacks Consensus Estimate on both the top and bottom lines and lifted its full-year earnings guidance.
Earnings per share came in at $3.72, way above the Zacks Consensus Estimate of $3.08 and up from the year-ago earnings of $2.30. Revenues rose 10% year over year to $16.53 billion and edged past the estimate of $16.18 billion. Solid results were driven by record traffic between Thanksgiving and Christmas because of the increase in delivery for online shoppers.
FedEx raised its fiscal 2018 earnings per share guidance to $15.00-$15.40 from $12.70-$13.30 driven by foreign tax benefits from the international corporate structure, the benefits of the U.S. tax reform and improved operating performance. The new range is much higher than the Zacks Consensus Estimate of $13.51.
Following the solid results, FDX shares rose nearly 4% in aftermarket hours on elevated volume. FedEx carries a Rank #2 (Buy) and a VGM Score of A. It falls under a top-ranked Zacks industry (top 37%), suggesting its continued outperformance (see: all the Industrials ETFs here).
ETFs in Focus
The solid FedEx report is expected to benefit transport ETFs iShares Dow Jones Transportation Average Fund IYT, SPDR S&P Transportation ETF XTN and First Trust Nasdaq Transportation ETF FTXR. All these funds have a Zacks ETF Rank #3 (Hold).
IYT
The ETF tracks the Dow Jones Transportation Average Index, giving investors exposure to the small basket of 20 securities. Out of these, FedEx occupies the top position in the basket with 14.6% of the assets. Within the transportation sector, air freight and logistics takes the top spot with 29.9% share in the basket while railroads (24.7%), trucking (19.5%) and airlines (19.4%) round off the next three. The fund has accumulated nearly $865.9 million in AUM while it sees a good trading volume of around 234,000 shares a day. It charges 44 bps in fees per year and has gained 0.9% in the year-to-date time frame (read: Will Infrastructure ETFs Get a Boost from Trump's Plan?).
XTN
This fund follows the S&P Transportation Select Industry Index and uses almost an equal weight methodology for each security. Holding 42 stocks with AUM of $240.5 million, FedEx accounts for 2.5% share in the basket. The product is heavily exposed to trucking, which accounts for 32.3% of total assets while airlines and air freight & logistics also make up for 25.1% and 24.1%, share, respectively. The fund charges 35 bps in fees per year from investors and trades in a light volume of about 36,000 shares a day. XTN is up 0.08% so far in the year.
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 occupies the second position in the basket with 8% share. FTXR has accumulated $2.6 million in its asset base and charges 60 bps in annual fees. Average trading volume is meager at 1,000 shares. The ETF has shed 0.04% in the year-to-date time frame (read: Invest Like Warren Buffett With These ETFs).
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ISHARS-TRAN AVG (IYT): ETF Research Reports
SPDR-SP TRANSPT (XTN): ETF Research Reports
FedEx Corporation (FDX) : Free Stock Analysis Report
FT-NDQ TRANSPRT (FTXR): ETF Research Reports
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