Transportation giant FedEx Corp. (NYSE:FDX) recently raised its full-year forecasts despite a drop in profits and an increase in revenues in the second quarter, providing positive price support to the iShares Dow Jones Transportation ETF (BATS:IYT).
The Memphis-based company reported strong gains in package shipping internationally and raised its expectations for domestic shipments on expected US GDP growth and positive macroeconomic trends. The increased revenue that the company witnessed was primarily driven by increases in online and catalog shopping by US consumers, which require shipping to either a store front or directly to the consumer’s front door. A second force that contributed to the 12 percent year-over-year increase in revenue came from the record high exports from the Asia Pacific region that was seen.
As for the near-term future, shipping trends are expected to remain favorable as retailers are showing a low inventory-to-sales ratio, or low investment in inventory compared to monthly sales, and are expected to bump up inventory-to-sales ratios as the economy continues to show signs of prosperity and consumer spending increases.
As mentioned above, the iShares Dow Jones Transportation ETF (IYT) is expected to be influenced by the aforementioned as that it boasts FedEx as its top holding at 10.32% of its total asset base.
Disclosure: No positions