Transportation Stocks Q3 Earnings Coming Up: USAK, TNP

The Q3 earnings season is in its last leg for the majority of sectors. Retail and Consumer Discretionary are the only sectors that are yet to see several industry players reporting their Q3 results. According to our latest Earnings Preview report, 72.8% of the S&P 500 Index (accounting for 78.2% in terms of market capitalization) has already reported in their numbers this earnings season.

The picture that has emerged is quite impressive, with both the bottom line and top line expanding 1.6% year over year. In fact, the Q3 earnings season is likely to become the first quarter to register year-over-year bottom-line expansion after five consecutive quarters of earnings decline. The report predicts that the S&P 500 Index will end Q3 with the top line and bottom line increasing 1.4% and 2.4%, respectively.

Despite the overall improvement, the prospects of the widely diversified Transportation sector (one of the 16 Zacks sectors) appear dull. The quarterly results of the 93.3% S&P 500 transportation companies that have been announced indicate a bearish trend, thanks to the multiple headwinds facing the companies in the space. The challenges are varied in nature – weak travel demand due to rise in terror attacks, Brexit-induced uncertainty, high labor costs, driver shortages and declining coal shipments to name a few.

These headwinds have resulted in bottom-line contraction of 13.7% for the sector so far in Q3. The year-over-year decline in the earnings of key sector participants like Delta Air Lines (NYSE:DAL) and Norfolk Southern (NYSE:NSC) added to the woes. With only a handful of transportation earnings reports remaining to be announced, the trend is unlikely to reverse. According to the above-mentioned report, the sector is projected to end Q3 with earnings decline of 13.5%.

Investors interested in the transportation space will keenly await reports from the likes of USA Truck, Inc. (NASDAQ:USAK) and Tsakos Energy Navigation Limited (NYSE:TNP) to find out as to whether they can turn the tide for this beleaguered sector.

USA Truck, a provider of comprehensive capacity solutions to a broad and diverse customer base throughout North America, is scheduled to report its Q3 results on Nov 4. Things look rather gloomy for the company this earnings season. According to our quantitative model, a company needs the right combination of two key ingredients – a positive Earnings ESP and a Zacks Rank #3 (Hold) or better – to increase the odds of an earnings surprise. Despite the company having an Earnings ESP of +54.55% (the Most Accurate estimate is 6 cents above the Zacks Consensus Estimate of 11 cents), its Zacks Rank #4 (Sell) complicates matters, making an earnings beat unlikely in Q3. As it is, we caution against Sell-rated stocks going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Tsakos Energy Navigation Ltd. is a leading provider of international seaborne crude oil and petroleum product transportation services. The company is expected to report Q3 results on Nov 4. The transportation has a Zacks Rank #4 and an Earnings ESP of -100% (the Most Accurate estimate of a breakeven is 4 cents below the Zacks Consensus Estimate). The unfavorable combination makes an earnings beat unlikely in Q3.

Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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