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Transport Stocks Q4 Earnings on Jan 26: LUV, JBLU, SWFT

Zacks Equity Research

The Q4 earnings season is picking up pace. The current week is an extremely busy one with earnings reports flowing in from every possible corner. According to our latest Earnings Preview report, by the end of this week 168 S&P 500 companies will have unveiled their quarterly numbers. Out of these, 105 are likely to report their results in the course of this week.

According to the above report, the Q4 reporting cycle is expected to witness higher bottom-line growth than Q3. We note that the S&P 500 companies had witnessed year-over-year bottom-line growth of 3.8% in Q3, making it the first quarter to witness earnings expansion after five consecutive quarters of decline. The index is projected to see bottom-line expansion of 4.8% and the top line is predicted to grow at 3.7% in Q4.

10 of the 16 Zacks sectors are projected to end Q4 with earnings growth. Unfortunately, the transportation sector is not one of them. The bottom line for this highly-diversified sector is projected to contract at 18.9%. In fact, we have already seen players like United Continental Holdings UAL and Kansas City Southern KSU reporting significant year-over-year bottom-line decline in Q4.

Increasing labor costs are likely to hurt the bottom line for most of the sector participants, particularly the airlines. Nonetheless, the picture with respect to revenues is much better. The top line for the sector is projected to expand at 4.6%.

Given this backdrop, investors interested in the transportation space will keenly await Q4 reports from key sector participants like Southwest Airlines Co. LUV, JetBlue Airways Corporation JBLU and Swift Transportation Company SWFT scheduled for Jan 26.

The Dallas- based Southwest Airlines is a low-cost carrier. According to our quantitative model, a company needs the right combination of two key ingredients – a positive Earnings ESP and a Zacks Rank #3 (Hold) or better – to increase its odds of an earnings surprise. Currently, an earnings beat is not guaranteed for Southwest Airlines in Q4. This is because, the Zacks Rank #2 (Buy) company currently has an Earnings ESP of 0.00% (Most Accurate estimate is in line with the Zacks Consensus Estimate of 69 cents). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Previously, our model had called for an earnings beat as the Earnings ESP was +1.47%. The Zacks Rank was the same  (Read more: Southwest Airlines Q4 Earnings: A Beat in the Cards?).

Southwest Airlines Company Price and EPS Surprise


Southwest Airlines Company Price and EPS Surprise | Southwest Airlines Company Quote

The Long Island City, NY-based JetBlue Airways focuses on providing high-quality customer service. We expect the low-cost carrier to top the Zacks Consensus Estimate in Q4. This is because it has an Earnings ESP of +2.04% and a Zacks Rank #3 (Read more: JetBlue Airways  Q4 Earnings: A Beat in the Cards?).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

JetBlue Airways Corporation Price and EPS Surprise


JetBlue Airways Corporation Price and EPS Surprise | JetBlue Airways Corporation Quote

Swift Transportation Company operates one of the largest fleets of truckload equipment in North America from more than 40 terminals near key freight centers and traffic lanes. The Phoenix, AZ-based transportation company is unlikely to beat the Zacks Consensus Estimate for earnings in Q4, as per our quantitative model. The company an Earnings ESP of +2.50% (the Most Accurate estimate of 41 cents is a penny higher than the Zacks Consensus Estimate) but a Zacks Rank #5 (Strong Sell). Please note that we caution against Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Swift Transportation Company Price and EPS Surprise


Swift Transportation Company Price and EPS Surprise | Swift Transportation Company Quote

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Southwest Airlines Company (LUV): Free Stock Analysis Report
JetBlue Airways Corporation (JBLU): Free Stock Analysis Report
Kansas City Southern (KSU): Free Stock Analysis Report
Swift Transportation Company (SWFT): Free Stock Analysis Report
United Continental Holdings, Inc. (UAL): Free Stock Analysis Report
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