The transportation-based exchange traded fund (ETF) iShares Dow Jones Transportation Index (IYT) recently received news of strong earnings reports on top holdings. Currently, IYT is up 7.8% year-to-date.
Union Pacific Corp. (UNP), IYT’s largest holding at 11.1%, said today that its third-quarter net income climbed 27% thanks to record shipping volume and revenue, as well as improved operating efficiency. UNP is the largest U.S. railroad operator. The company also said it expects to post earnings growth again in the fourth quarter, despite economic and fuel-price obstacles, as a result of continued pricing power and increased productivity, reports Stephen Wisnefski for Dow Jones Newswires.
CSX (CSX), another IYT holding that operates one of the largest rail networks in the U.S., had better-than-expected results that pushed the company’s shares sharply higher yesterday. Shares of CSX rose 5.8% after the company said that its third-quarter earnings rose 24.1% to $407 million from $328 million a year ago, reports Andrew Farrell for Forbes. Some of the factors behind the increase included improved operations, an increase in on-time arrivals, decreased accidents and fast shipments.
Although these earnings reports are good news for IYT, we have to wonder how the record-high oil prices will affect the ETF. Will companies within IYT, such as FedEx (FDX) and Ryder Systems (R), be forced to raise their prices to compensate or will operating efficiency prevail?
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.