U.S. Markets open in 1 hr 39 mins

Transportation ETF Slips After UPS Slashes Outlook


The iShares Transportation Average ETF (IYT) was in the red Friday morning as a nearly 6% sell-off in top holding United Parcel Service (UPS) weighed on the fund.

UPS shares were under pressure after the company lowered its full-year profit outlook. Also, it expects second-quarter earnings to come in below Wall Street forecasts.

“Overcapacity in the global air freight market, increasing customer preference for lower-yielding shipping solutions, and a slowing U.S. industrial economy drove revenue and operating profit below expectations,” the company said. “In addition, UPS experienced some slowing in package volume growth as a result of labor negotiations.”

UPS is the fourth-largest holding in the Transportation Average ETF at 7.5% of the portfolio.

The fund enjoyed a big rally earlier this week driven by a surge in FedEx (FDX) shares. [FedEx Ackman Talk Fuels Transportation ETF’s 4% Rally]

The Transportation Average ETF is up 22.9% year to date compared with a gain of 18.8% for the S&P 500.

“IYT holds rail companies, truckers, delivery-services firms, freight forwarders, airlines, and marine transport players. It contains 20 companies and is quite concentrated,” said Morningstar analyst Robert Goldsborough in a recent report on the ETF. “The top 10 holdings account for more than 67% of assets, and the top three holdings comprise more than 29% of assets.”

iShares Transportation Average ETF

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.