ETFs To Watch On Solid FedEx Results

After the closing bell yesterday, the transport bellwether FedEx (NYSE:FDX) reported robust 2018 second-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 $3.18, far above the Zacks Consensus Estimate of $2.87 and up from the year-ago earnings of $2.77. Revenues rose 9.3% year over year to $16.30 billion and edged past the estimate of $15.67 billion.

The company is on track for another record holiday-shipping season. It expects solid demand trends and a rebound from a June cyberattack at its TNT Express unit in Europe to boost its earnings. As such, FedEx raised its fiscal 2018 earnings per share guidance to $12.70-$13.30 from $12.00-$12.80. The new range is much higher than the Zacks Consensus Estimate of $12.47.

Should tax reform come into effect, earnings per share could increase by an estimated $4.40- $5.50 for the fiscal year primarily due to the revaluation of net deferred tax liabilities and a lower tax rate on fiscal 2018 earnings (read: ETFs to Bet on the Final Tax Bill: What Hot, What's Not).

Following the results, FDX shares rose more than 2% in aftermarket hours on elevated volume. Currently, FedEx has a Rank #3 (Hold) and a VGM Score of B. However, it has a dismal Industry Rank in the bottom 9%.

ETFs in Focus

The solid FedEx report is expected to benefit transport ETFs iShares Dow Jones Transportation Average Fund IYT, SPDR S&P Transportation (NYSE:XTN) ETF XTN and First Trust Nasdaq Transportation ETF FTXR. All these funds have an unfavorable 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 the small basket of 20 securities. Out of these, FedEx occupies the top position in the basket with 14.2% of the assets. Within the transportation sector, air freight and logistics takes the top spot with 30.6% share in the basket while railroads (24.7%), airlines (19.9%) and trucking (18.8%) round off the next three. The fund has accumulated nearly $855.4 million in AUM while it sees a good trading volume of around 230,000 shares a day. It charges 44 bps in fees per year and has gained 17.6% in the year-to-date time frame.

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 $213.8 million, FedEx accounts for 2.5% share in the basket. The product is heavily exposed to trucking, which accounts for 32.7% of total assets while airlines and air freight & logistics also make up for 25.7% and 22.9%, share, respectively. The fund charges 35 bps in fees per year from investors and trades in a light volume of about 24,000 shares a day. XTN is up 20.7% so far in the year (read: ETFs & Stocks to Gain on Record Thanksgiving Travel).

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 top position in the basket with 8.3% share. FTXR has accumulated $3.8 million in its asset base and charges 60 bps in annual fees. Average trading volume is meager at 1,000 shares. The ETF has added 14% in the year-to-date time frame.

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>

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

Original post

Zacks Investment Research