Transportation sector-related exchange traded funds gained momentum Thursday as low energy costs may be boosting the industry’s bottom line and fright traffic accelerates.
On Thursday, the iShares Transportation Average ETF (NYSEArca: IYT) gained 2.6% and the SPDR S&P Transportation ETF (NYSEArca: XTN) rose 3.6%.
In the transport space, Roadrunner Transportation Systems (NYSE: RRTS) raced ahead Thursday, surging 33.0% and breaking above its short-term, 50-day trend line. Roadrunner Transportation Systems rallied after reporting better-than-expected profit expectations and upbeat guidance for the year.
RRTS makes up 0.5% of XTN.
Roadrunner stocks jumped after the company revealed fourth-quarter profit of $12.1 million, with a net income of 32 centers per-shares, the Associated Press reports.
Looking ahead, Roadrunner’s Chief Financial Officer Peter Armbruster believes the currently weak freight environment will begin to recover during the second half of 2016.
According to the U.S. Bureau of Transportation, the volume of freight transported by road, rail, air, barge and pipelines has been flattening or lower since the end of 2014, Reuters reports.
“I remain concerned about the high level of inventories throughout the supply chain,” association’s chief economist warned in a statement to the media last month. “The total business-to-inventory sales ratio is at the highest level in over a decade, excluding the Great Recession period. This will have a negative impact on truck freight volumes over the next few months at least.”
Meanwhile, a stubbornly low energy prices may help the transportation industry cut down on costs.
“Recently declining fuel prices only have a short-term impact on transportation firms,” Morningstar analyst Robert Goldsborough said in a note. “Most firms use fuel surcharge programs to pass through changes in fuel prices. In the short run, firms enjoy a margin benefit for several quarters from rapid fuel price declines because of the time lag in adjusting surcharges to shippers.”
SPDR S&P Transportation ETF
Max Chen contributed to this article.