3 Transportation Stocks to Buy Ahead of Q4 Earnings Release – January 18, 2022


Delta Airlines (DAL Free Report) kicked off the fourth quarter 2021 earnings season for the transportation sector on January 13, 2022. The airline giant performed well, reporting earnings per share and revenue above expectations. Buoyant passenger traffic during the holiday season contributed to the results.

Although Delta management expects the carrier to incur a loss in the March quarter due to omicron issues, the outlook for the rest of the year is bright. DAL expects to make a profit in the remaining three quarters of 2022. The impressive earnings report and long-term bullish outlook boosted DAL stock following the earnings announcement.

After Delta, a plethora of transportation stocks are expected to release fourth-quarter financial numbers within the next month. In this context, investors interested in the transport sector would like to add stocks such as Washington International Shippers (EXPD free report), Copa Holdings (PCA free report) and ArcBest Corporation (ARCB Free report) to their respective portfolios for higher returns.

Our latest earnings overview indicates that earnings in the transportation sector have likely recorded a huge jump in the last quarter of 2021 compared to the actual figures of the previous year, despite the current crisis caused by the omicron. With the reopening of economies, economic activities have accelerated, thanks to large-scale vaccination programs. Given with injections, people are now more confident to go outside and resume their daily activities.

Rising trade volumes have likely contributed to the earnings picture of this highly diverse transportation sector, particularly those of the rail and shipping industry. The performance of the sector’s airlines in the fourth quarter probably benefited from the increase in passenger volumes. Other airlines like Delta might also expect omicron’s impact to be short-term rather than long-term.

Additionally, upbeat freight demand, driven by increased consumer spending, construction and manufacturing activity, likely contributed to trucking inventory performance in the December quarter. Additionally, the downward trend in growth relative to the price of oil is also likely to have supported the overall performance of transportation stocks in the fourth quarter. Indeed, fuel expenses represent one of the highest entry costs for these companies. Of course, the price of oil edged up 0.3% in the quarter, based on the sequential quarter reading. The rise in oil prices is lower than the 2.1% rise in the third quarter from second quarter levels.

Against this backdrop, we believe investors should add transportation stocks to their portfolios. Below we feature three stocks in the sector, currently carrying either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the full list of today’s Zacks #1 Rank stocks here. Additionally, each of the stocks has a positive ESP on earnings, making an earnings overrun likely. The combination of a positive payout ESP and a Zacks rank of #1, 2, or even 3 (Hold) increases the chance of a payout surprise. You can discover the best stocks to buy or sell before they’re flagged with our earnings ESP filter.

Senders currently has a +2.97% Earnings ESP and a #1 Zacks Rank. EXPD is supported by optimistic airfreight revenues. Consistent with the first three quarters of 2021, we expect air cargo revenue to contribute to Expeditors’ fourth quarter 2021 results (expected February 22, 2022).

Shares of Expeditors have jumped 30.8% in one year. The optimism surrounding the stock is evident in the 2.5% northward revision to the Zacks consensus estimate for December quarter earnings over the past 60 days.

Copa Holdings with Zacks ranking #2 at present and an earnings ESP of +11.01% is expected to release Q4 2021 results on February 9. Driven by factors such as increased immunization, economic activities are slowly accelerating, boosting consumer confidence in Latin America. As a result, passenger revenue likely improved at the Latin American carrier in the December quarter.

Copa Holdings has an impressive history of earnings surprises in which its net income has beaten Zacks’ consensus estimate in three of the past four quarters and missed the mark in the remaining quarter. CPA shares have gained 9.8% in one year.

ArcBest Corporation currently has a +2.56% earnings ESP and is currently ranked No. 2 in Zacks. ARCB’s earnings have exceeded the Zacks consensus estimate in each of the past four quarters, averaging 27.4%. The Zacks consensus estimate for ARCB’s December quarter earnings has been revised up 0.91% over the past 60 days.

ArcBest shares have soared 185.5% so far this year. Improved freight conditions in the United States likely contributed to ARCB’s performance in the fourth quarter. Strong customer demand and rising market rates are also likely to have supported results (expected release February 2, 2022).

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