Transport ETFs In Focus On United Parcel Service, Inc.’s Sluggish Outlook

Transportation was one of the best performing sectors of 2013 and this trend continues in 2014. This is largely thanks to solid U.S. economic recovery and improving investor sentiment.


Generally, transportation companies get busier when economic activity picks up, which in turn results in strong demand for movement of goods across many economic sectors.


However, the space was hit by severe cold weather that restricted the movement of people and goods by road, air or ship throughout the country. This pushed down the stocks for many companies.


Further, the recent profit warning and sluggish outlook from the bellwether United Parcel Service (NYSE:UPS) has dampened investor mood making them cautious on the stock and the broad sector.


UPS Warns of 4Q Earnings


The world’s largest package delivery company said that the shorter holiday season, Christmas delivery delays as well as unusually harsh winter took a toll on the earnings for the fourth quarter and full-year 2013. The company now projects earnings for Q4 to come in at $1.25 per share, well below the Zacks Consensus Estimate of $1.42.


United Parcel also slashed its full-year guidance to $4.57 per share, significantly below current street estimates that peg the firm’s 2013 earnings at 4.65–$4.85 a share and the Zacks Consensus Estimate of $4.75 (read: Buy these ETFs to Profit from the Earnings Season).


Though UPS had employed 85,000 temporary workers, it could not deliver many packages in time for Christmas.


Weak 2014 Guidance


Further, the company expects 2014 earnings to grow 10–15% in 2014 to around $5.02–$5.26 per share thanks to the online shopping trend. But this is below the Zacks Consensus Estimate of $5.40 per share.


Though the industrial sector is booming, the news has spread bearishness not only on this package delivery giant but also on the space (see: all the Industrials ETFs here).


Stock Impact


As expected, UPS shares fell sharply as much as 4% in early trading on Friday after this bearish announcement before recovering. The stock was down nearly 0.6% at the close. The volume levels were also notable with three times more shares trading hands than the normal trading days.



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