All Eye On Q1 Earnings

As investors sift through a rather vague tax cut proposal that Treasury Secretary Steve Mnuchin asserts “will pay for itself” but House Ways & Means Chairman Kevin Brady allows may see resistance from both the left and the right, we see new Initial Jobless Claims this morning, as well as another heavy dose of Q1 earnings reports, of course. Markets have been what can be best described as “cautiously optimistic” — pleased to see talk of tax cuts moving forward on the White House agenda, but wary of the lack of detail thus far disclosed. So we saw trading slide into the red yesterday afternoon following a healthy day in the green earlier.

Initial Jobless Claims once again popped out of its range of the past few months between 225K-250K to 257K for last week, a jump of 14K from the previous read. This is still reflective of U.S. labor market strength, although not as strong as in prior weeks of 2017. That said, the 4-week moving average is a notch above 242K, and even then a 250K jobless claims number is merely psychologically profound, not materially.

Q1 Earnings for Transportation Stocks

Transporting back to Q1 earnings results ahead of the bell today, we focus on reports from companies in the broader Transportation sector.

American Airlines (NASDAQ:AAL) , a Zacks Rank #3 (Hold) stock with a Zacks Style Score (Value, Growth, Momentum) of A, beat earnings estimates by 4 cents to 61 cents per share on revenues exactly in line with the $9.62 billion expected. Higher fuel costs and higher crew payouts created some headwinds for the airline major, which also announced it will now offer up to $10K for customers to give up their seats on overbooked flights — a clear response to the PR nightmare that befell United Airlines (NYSE:UAL) earlier this month.

Southwest Airlines (NYSE:LUV) , also a Zacks Rank #3 but with a Style Score of C, reported 61 cents per share as well. Trouble is, it was a one-cent miss from the Zacks consensus estimate. Revenues came in just a tad below estimates at $4.88 billion. The company also cited higher fuel costs and mentioned that its passenger revenue environment has gotten tougher. This is the second earnings miss for Southwest in the last 4 quarters.

Ford Motor Co. (NYSE:F) posted a 5-cent beat ahead of today’s opening bell to 39 cents per share. Quarterly sales were similarly impressive: $39 billion easily bested the $34.8 billion expected. This is all despite the pent-up demand for new autos having softened over the past year or so, and Ford also spent nearly $300 million on two safety recalls in the quarter. The underlying strength has bolstered Ford shares up roughly 2% in today’s pre-market.

Railroad major Union Pacific (NYSE:UNP) surprised analysts to the upside this morning when it reported earnings of $1.32 per share on $5.13 billion in quarterly sales, topping the $1.23 per share and $5.00 billion expected. Earnings growth is an impressive 14% year over year, despite a cooled-off coal market that reduced shipments via rail. Union Pacific is also a Zacks Rank #3 stock with a Style Score of C prior to the earnings release.