The widely-diversified Zacks Transportation sector, which houses airlines, railroads, shipping and trucking companies, to name a few, has been particularly hit hard by the coronavairus pandemic. While the sector is gradually recovering from the coronavirus-induced slump, thanks to the improving economy, it is still significantly weak when compared with the 2019 levels (pre-pandemic) as airlines continue to struggle with depressed travel demand.
Last week United Airlines UAL reported fourth-quarter 2020 earnings numbers. The carrier incurred a loss of $7 per share, wider than the Zacks Consensus Estimate of a loss of $6.56. Operating revenues of $3,412 million lagged the Zacks Consensus Estimate of $3,420.4 million and also declined 68.7% year over year due to 75.7% drop in passenger revenues, thanks to coronavirus keeping people away from air travel.
Meanwhile, railroad operator CSX Corporation (NASDAQ:CSX) CSX outperformed fourth-quarter earnings and revenue estimates on improving freight market conditions. While the bottom line increased 5.1% year over year due to impressive performance of the intermodal segment, the top line dipped 2.1% year over year owing to lower fuel surcharge revenues and coal volume declines. Trucking company J.B. Hunt Transport Services JBHT too reported better-than-expected fourth-quarter results.
What’s in Store for Other Players?
The latest Earnings Outlook (data as of Jan 20, 2021), suggests that earnings for the S&P 500 members of the transportation sector are anticipated to plunge 101.2% year over year in the December quarter while revenues are estimated to decline 20.8%. This compares with 116.8% and 27.3% drop in earnings and revenues in the third quarter of 2020, respectively. The improvement in projection compared to the actual performance in the third quarter of 2020 is primarily due to the gradual resumption of economic activities.
Notably, the railroad and trucking companies are benefiting from the gradual recovery in the freight scene, which is expected to reflect in the top-line numbers of these companies. While reduced costs and increased efficiency from the precision scheduled railroading model are anticipated to have supported the bottom lines of railroad players, cost-control measures to combat the coronavirus-led challenges should reflect in the bottom lines of trucking companies.
Additionally, with fuel expenses comprising a significant input cost for most transportation players, low fuel prices are anticipated to have aided the bottom lines of these companies in the fourth quarter.
Despite having improved, lease demand is significantly below 2019 levels as coronavirus concerns continue. This is likely to have impacted lease rates, which in turn might have affected the fourth-quarter performance of transport equipment and leasing companies.
Against this backdrop, investors interested in the transportation sector will keenly await fourth-quarter reports from leading players, namely Canadian National Railway Company CNI, C.H. Robinson Worldwide, Inc. CHRW, GATX (NYSE:GATX) Corporation GATX and Marten Transport (NASDAQ:MRTN), Ltd. MRTN on Jan 26.
Our quantitative model suggests that a company needs the right combination of the following two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or better — to increase the odds of a positive earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Canadian National is engaged in the rail and related transportation business.
The company has an Earnings ESP of -0.23% and a Zacks Rank #3, which makes surprise prediction difficult.
C.H. Robinson is a third-party logistics company based in Minnesota.
The company is likely to beat on earnings in the fourth quarter as it has an Earnings ESP of +0.12% and a Zacks Rank of 3.
Our model had also predicted a beat for the company when we issued our fourth-quarter earnings preview article. Back then the stock had an Earnings ESP of +1.01% and the same Zacks Rank.
GATX leases, operates and manages long-lasting, widely used assets in rail, marine and industrial equipment markets.
This company has an Earnings ESP of 0.00% and a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Marten Transport is a long-haul truckload carrier providing protective service and time-sensitive transportation in the United States.
Its Earnings ESP of 0.00% and a Zacks Rank #2 make surprise prediction difficult.
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Canadian National Railway Company (CNI): Free Stock Analysis Report
CSX Corporation (CSX): Free Stock Analysis Report
C.H. Robinson Worldwide, Inc. (CHRW): Free Stock Analysis Report
United Airlines Holdings Inc (NASDAQ:UAL): Free Stock Analysis Report
J.B. Hunt Transport Services, Inc. (JBHT): Free Stock Analysis Report
Marten Transport, Ltd. (MRTN): Free Stock Analysis Report
GATX Corporation (GATX): Free Stock Analysis Report
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