UPS Says Outlook Not So Good; Will It Be So for Transportation ETF? | ETF Trends

UPS (UPS) has lowered its second-quarter outlook, putting a crimp in the transportation exchange traded fund’s (ETF) style.

The world’s largest shipping carrier has been hit by a slowing economy in the United States and record fuel prices, which translate into lower-than-expected package volume, reports Harry Weber for the Associated Press. The quarter ends June 30, and the results will be announced on July 22.

Back in April, UPS lowered its earnings guidance for the year and projected that the economy would continue to inflict pain. But this most recent quarter has been even tougher than expected.

The iShares Dow Jones US Transportation Average (IYT), is actually weathering the downturn all right year-to-date, up 12.5%. UPS is 7.2% of the fund. In early trading this morning, it’s down more than 2%.

The railroads are another major component of the ETF, and Robert Wright for the Financial Times reports that while Norfolk Southern (NSC) and CSX (CSX)
might outwardly be tough to tell apart, they’re quite a bit different.
While they dominate the industry east of the Mississippi, Norfolk
Southern has performed better financially and operationally than CSX
for nearly their entire history.

The reasons for CSX’s underperformance and how to close that gap are
going to be key issues in the battle over board seats at the company’s
annual meeting, which takes place tomorrow in New Orleans. The outcome
could shape the future of shareholder involvement in the industry.

CSX is 5.2% of IYT, while Norfolk Southern is 5.2%.

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For full disclosure, some of Tom Lydon’s clients own shares of IYT.

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.