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Transports to Watch for Earnings on Apr 20: SALT, WERN & HA


The Q1 earnings season is off to a strong start with big names like JPMorgan Chase & Co. JPM and Citigroup C reporting better-than-expected results. According to our earnings preview report, the impressive performance is likely to continue. The top and bottom lines (for S&P 500 companies) are projected to expand 7.6% and 6.3%, respectively (on a year-over-year basis) in Q1. Both figures compare favorably to the readings in Q4 when bottom line expanded 7.4% (highest growth in almost two years) and revenues grew 4.7%.

Nevertheless, the transportation sector, however, does not share the rosy picture and is projected to end Q1 with the worst earnings picture amongst all the 16 Zacks sectors. The bottom line for the S&P 500 companies in this highly-diversified sector is projected to contract 21.7%, due to higher costs. In fact, the reading compares unfavorably to the segmental bottom line contraction of 18.2% in Q4.

Despite the pessimism surrounding the space, early reports from key sector participants like Delta Air Lines DAL and United Continental Holdings UAL are not discouraging. Both airline heavyweights have reported better-than-expected earnings in Q1.

Given this backdrop, investors interested in the transportation space will keenly await earnings reports from players like Scorpio Bulkers Inc. SALT, Werner Enterprises, Inc. WERN and Hawaiian Holdings Inc. HA on Apr 20.

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.

Monaco-based, Scorpio Bulkers Inc. provides marine transportation of dry bulk commodities. This shipping company is likely to outperform on the bottom-line front in Q1 as per our quantitative model. Scorpio Bulkers has an Earnings ESP of +23.81% and holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Werner Enterprises, Inc. is a transportation company with operations across the U.S. It is unlikely to report better-than-expected earnings in Q1 although its Earnings ESP is +4.76% (as, the Most Accurate Estimate of 22 cents per share exceeds the Zacks Consensus Estimate by a penny) as it has a Zacks Rank #4 (Sell). You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Please note that we caution against stocks with Zacks Ranks #4 or 5 (Strong Sell) going into an earnings announcement, especially when the company is seeing a negative estimate revision.

Finally, Hawaiian Holdings Inc. the parent company of Hawaiian Airlines focuses on providing scheduled air transportation of passengers and cargo. Currently, an earnings beat is not guaranteed for the company in Q1. This is because it carries a Zacks Rank #3 company and has an Earnings ESP of 0.00% (as the Most Accurate estimate is in line with the Zacks Consensus Estimate of 86 cents).

Previously, our model had called for an earnings beat as the Earnings ESP was +1.18%. The Zacks Rank was the same (Read more: Hawaiian Holdings Q1 Earnings: A Beat in the Cards?).

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