Thu, Sep. 3, 3:12 PM
- How bad a year has it been for multi-industry stocks? Year-to-date underperformance relative to the S&P 500 is among the poorest in a decade and has gotten worse in recent weeks, say Goldman analyst Joe Ritchie and team. The negative news is no secret: Broad industrial de-stock, softening oil capex, the strong dollar, and the troubles in China. Because of this, the team remains Neutral on the beaten-up sector, but does have a few names investors should steer clear of:
- With de-stock keeping U.S. industrial growth in a "headlock," the implications are particularly negative for Sell-rated Emerson Electric (NYSE:EMR), WW Grainger (NYSE:GWW), and Neutral-rated Parker-Hannifin (NYSE:PH) and Rockwell Automation (NYSE:ROK).
- With oil capex going from bad to worse, and oil lower for longer, the Street is underestimating the impact of price declines for Dover (NYSE:DOV), Emerson, and Flowserve (NYSE:FLS). On the flip side, lower input costs should be a boon to Buy-rated Illinois Tool Works (NYSE:ITW) and Neutral-rated 3M (NYSE:MMM).
- The weaker China backdrop is most negative for Emerson, and Neutral-rated Eaton (NYSE:ETN) and Colfax (NYSE:CFX). Though Buy-rated Honeywell (NYSE:HON) and ITT Corp (NYSE:ITT) have exposure, growth is more insulated due to their market share gains.
- Source: Barron's Ben Levinsohn
- ETFs: XHB, ITB, XLI, PHO, IYT, ITA, VIS, PPA, XTN, XAR, FIDU, PKB, IYJ, FXR, UXI, PRN, RGI, SIJ, PSCI, AIRR
Fri, Aug. 28, 10:50 AM
- UBS lines up three transportation stocks it sees as trading at attractive valuations.
- FedEx (FDX -0.2%): The shipping giant trades at a discount to UPS and is leveraged to e-commerce growth, notes the investment firm. The UBS price target of $195 implies 27% upside potential.
- Knight Transportation (KNX +2.9%): Lower fuel costs and strong GDP numbers bode well for the trucking stock. UBS has a price target of $33.
- Kansas City Southern (KSU +0.9%): UBS thinks additional capacity could make a difference for the railroad. A 19% breakout for shares to $111 is seen.
- Related ETFs: IYT, XTN.
Tue, May 26, 9:57 PM
- Airline stocks stretched their losing streak to six sessions today, the longest such stretch since last October and the worst cumulative showing (-8.8%) since shedding 10.9%, also in October.
- Analysts cite pressure from concerns over capacity growth and the resulting lack of pricing power, as well as a May spike in west coast jet fuel prices due to several unscheduled refinery outages; "jet fuel assumptions at airlines may have to be raised due to the high cost of refining jet fuel on the west coast," Cowen's Helane Becker says.
- Even as he remains somewhat bullish on the stocks, UBS analyst Darryl Genovesi today cut his earnings estimates this year and next for American (NASDAQ:AAL), Delta (NYSE:DAL) and Alaska Air (NYSE:ALK), and lowered his estimate for Southwest (NYSE:LUV) earnings this year and United (NYSE:UAL) in 2016.
- Among some of the more active airline stocks, DAL has fallen 11%, JetBlue (NASDAQ:JBLU) has shed 8.7%, AAL has plunged 15%, and LUV has sunk 14% over the past six sessions.
- ETFs: IYT, JETS
Fri, May 15, 11:02 AM
- Dow Theory types have something to worry about thanks to a widening spread between the record-setting DJIA (NYSEARCA:DIA) and the underperforming Dow Jones Transportation Average (XTN, IYT).
- The divergence began last November when the Transports hit a record-high. Since, the Transports are down 6.7% while the DJIA is ahead more than 2%.
- The editor of TheDowTheory.com, Jack Schannep found 14 instances of wide divergences over the last 25 years. In nine of them, the broader market subsequently declined by less than 10%, but in the other five, the fall averaged 25.7%, i.e. a full-scale bear market.
- ETFs: DIA, DOG, DXD, UDOW, SDOW, DDM, UDPIX
Sat, Jan. 17, 8:28 AM
- Up for discussion is not necessarily where oil prices are going (who knows?), but the effect of the recent plunge in price on the economy.
- Summing up the bear case is Felix Zulauf who says It'll hurt the economy dramatically thanks to lower capital spending, and he notes a lot of oilfield jobs are high-paying ones. Consumers will benefit from lower energy costs, but will save the money instead of spending it. If lower oil prices benefit consumer discretionary spending, says Marc Faber, why did 89% of S&P consumer discretionary companies (NYSEARCA:XLY) offering Q4 guidance issue negative guidance?
- Those are lagging figures, says Mario Gabelli, reminding the big collapse in prices only came around Thanksgiving and the effects are just beginning to show up in the form of lower credit card statements. "I talk to the guys who are pumping gas, and they say the consumer is buying more beer."
- Also on the bullish side is Abby Cohen, who reminds the transportation (NYSEARCA:IYT) and utility companies (NYSEARCA:XLU) are major consumers of energy, and her team at Goldman sees the oil decline as boosting S&P 500 (NYSEARCA:SPY) profits this year.
- Barron's Roundtable Part 1
Jun. 30, 2014, 6:53 PM
- Barclays upgrades its view of the transportation sector to positive, as an improving fundamental backdrop is set to drive meaningful earnings expansion across a broad array of transport companies.
- Among signs of improving fundamentals: rail volume up 7%, U.S. trucking demand up 3%-4%, small package markets up 5%, and global trade up 5%-6% - all implying strong industrial demand.
- Sector valuations are the highest since the 2009 recession and has outperformed YTD, but with Q2 results ripe to usher in more bullish sentiment in the space, Barclays expects valuations could have further to run as markets discount a more robust outlook.
- The firm's top recommendations in sector are UNP, UPS, SWFT, CP and JBHT, while also upgrading CNI and NSC to Overweight, adding more exposure to the favorable North American rail vertical.
- ETFs: IYT, XTN.
Jan. 24, 2014, 12:08 PM
- Previously immune to the selloff in the broader averages, things catch up to the Dow Transports Index (IYT -3%), with today's decline following yesterday's new all-time record.
- Richard Russell alert? Followers of Dow Theory like to see industrials and transports moving together to confirm a trend. Prior to today's action the DJIA (DIA -1.2%) was down 2.3% YTD while the transports were up 2.3% - giving hope the broad market might be set to reverse course. Today's slump though, brings the transports into the red for the year.
- Another transport ETF is the XTN.
- DJIA ETFs: DIA, DOG, DXD, UDOW, SDOW, DDM
Nov. 12, 2013, 12:10 PM
- AMR (AAMRQ +24%) soars upon settlement of the DOJ suit over its merger with U.S. Airways (LCC -0.6%).
- The two will divest 52 slot paris at Reagan National and 17 at LaGuardia, as well as two gates each at Logan International, O'Hare, Love Field, LAX, and Miami. Even with the divestitures, the new American is expected to generate net synergies of more than $1B beginning in 2015.
- IYT +0.6%.
- Press release.
Nov. 12, 2013, 10:25 AM
- Airline stocks are higher on chatter that a settlement between US Airways and AMR (AAMRQ) is close to being finalized.
- The industry for the most part would like to see the American-US Airways merger go through as it would make it easier to keep capacity discipline in line than if American emerged from bankruptcy as a feisty stand-alone.
- Advancers: US Airways (LCC) +2.7%, United Continental (UAL) +2.8%, Delta Air Lines (DAL) +1.7%, JetBlue (JBLU) +0.9%, Alaska Air Group (ALK) +0.9%.
- Related ETFs: IYT
Jul. 9, 2013, 11:10 AM
Jul. 1, 2013, 11:32 AMGet out of transports (IYT), says Citigroup, noting the sector will be hard-pressed to continue its 400 basis point outperformance to the S&P 500 over the last quarter. In addition to expected cyclical weakening, Citi says seasonals don't favor transports during the summer. Also lowered to underweight is telecoms (XTL, IYZ) despite attractive valuations, as Citi believes technology will continue to erode pricing power. | Jul. 1, 2013, 11:32 AM | Comment!
May 17, 2013, 8:13 AMThomas Lee lifts his year-end S&P 500 (SPY) forecast to 1,715 from 1,580 as the bull has already outrun his expectations. His team sees clues economic performance is picking up, including the outperformance of semiconductors (XSD) vs. transports (IYT), and the steepening of the 10 year/30 year Treasury curve. Risk/reward is particularly appealing in tech (XLK), healthcare (XLV), and financials (XLF). | May 17, 2013, 8:13 AM | Comment!
Mar. 7, 2013, 3:17 PMDow Theorists get chatty as both the DJIA (DIA) and DJ Transports (IYT) set all-time highs yesterday. "I've never seen anything like the action since the 2009 bottom," says Richard Russell. Ryan Detrick says when both averages make new highs near the same time, stocks tend to see strong returns over the following year. | Mar. 7, 2013, 3:17 PM | 4 Comments
Jan. 30, 2013, 9:11 AMQuick question: What's the biggest holding in the SPDR Retail ETF (XRT)? It's Netflix, with 1.68% of assets. Money poured into the XRT yesterday, with the fund growing AUM by 31.25% (Amazon is a 1.07% holding). The Transports (IYT) saw a big inflow, growing AUM by 17.9%. Losing funds was the SPDR Oil & Gas Explorers (XOP), down 15%. | Jan. 30, 2013, 9:11 AM | Comment!
Sep. 29, 2012, 8:55 AMStick the part from Dow Theory about the Transports and the DJIA needing to confirm each other in the same closet with your bell-bottoms, writes Jacqueline Doherty. Since the 1970s - as the U.S. has become a more service-oriented economy - the S&P 500 has gained an average 6.5% in the six months following a period (such as now) when the Transports have lagged. This handily beats the S&P's average 6-month gain of 4%. | Sep. 29, 2012, 8:55 AM | 11 Comments
Sep. 24, 2012, 11:10 AMLeading the bounce in the market today? It's the transports, IYT +0.9% as the S&P erases nearly all of its early loss. A dive in the transport index last week (and a general divergence from the S&P since the big rally started in June) has the Dow Theorists in a lather. | Sep. 24, 2012, 11:10 AM | 4 Comments
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