Transport ETFs To Gain On Solid FedEx Results

After the closing bell yesterday, transport bellwether FedEx (NYSE:FDX) reported robust 2018 fourth-quarter earnings results. The courier company outpaced the Zacks Consensus Estimate on both the top and bottom line and offered an upbeat guidance for fiscal 2019.

Earnings per share came in at $5.91, above the Zacks Consensus Estimate of $5.72 and up from the year-ago earnings of $4.19. Revenues rose 10% year over year to $17.3 billion and edged past the estimate of $17.19 billion. Solid results were driven by an e-commerce boom, which boosted package deliveries and a rebound in manufacturing, which fuels growth in fright business (read: Solid Data Fuels Trade of Momentum ETFs & Stocks).

FedEx foresees 2019 revenue growth of about 9%, which is much higher than the Zacks Consensus Estimate of 6.02% growth. It also expects earnings per share in the range of $17.00-$17.60; the midpoint of which is much higher than the Zacks Consensus Estimate of $17.18.

Following the solid results, FDX shares rose less than 1% in aftermarket hours as rising tension over trade between the United States and China left investors edgy. FedEx carries a Rank #2 (Buy) and a VGM Score of C. It falls under a top-ranked Zacks industry (top 12%), suggesting its outperformance to continue in the weeks ahead (see: all the Industrials ETFs here).

ETFs in Focus

Solid FedEx earnings are 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 though these have a Zacks ETF Rank #4 (Sell).

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 top position in the basket with 14.8% of the assets. Within the transportation sector, air freight and logistics takes the top spot with 30.3% share in the basket while railroads (25.8%), trucking (19.2%) and airlines (17.8%) round off the next three. The fund has accumulated nearly $883 million in AUM while it sees a good trading volume of around 232,000 shares a day. It charges 44 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 $232.3 million, FedEx accounts for 2.5% share in the basket. The product is heavily exposed to trucking, which accounts for one-third of the portfolio while airlines and air freight & logistics also make up for 25% and 23.1%, share, respectively. The fund charges 35 bps in fees per year from investors and trades in a light volume of about 31,000 shares a day (read: 4 Sector ETFs to Profit From Strong May Jobs Data).

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 7.1% 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.

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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

Original post

Zacks Investment Research