The Transportation sector has seen its overall growth estimates rise again and again over the past few months. The main reason for the increasing estimates is the declining cost of oil, one of the major cost inputs for every transportation company in the segment. In July oil had peaked, but then began to lose value month over month till late November when it dropped below the $75 level. That is when people started to really notice the negative trend in the commodity.
As you can see in the table below, the Transportation Sector growth estimates, through 2015, jumped after oil began its slide in late November.
While the sector was expected to do well before the oil plunge, the continuing decline of oil prices have propelled the sector to even higher expectations. You will notice that Fiscal Year 2015 has seen some recent pull back in estimates, this is due to the market believing that oil will roar back in the back half of 2015, but that does not matter when we are looking at a very short investment horizon (1-3 months).
Stocks to Consider
Allegiant Travel Co (ALGT) a Zacks Rank #1 (Strong Buy) focuses on linking travelers in small cities to world-class leisure destinations like Las Vegas, and Orlando Florida. Further, through its subsidiary, Allegiant Air LLC, the company operates a low-cost, high-efficiency, all-jet passenger airline offering air travel both on a stand-alone basis and bundled with hotel rooms, rental cars, and other travel related services.
Over the past 30 days estimates for Q4 14, FY 14, Q1 15, and FY 15 have all seen significant increases; Q4 14 rose from $1.27 to $1.37, FY 14 surged up from $5.82 to $5.98, Q1 15 increased from $2.30 to $2.57, and FY 15 jumped up from $7.53 to $8.56. Further, Allegiant has beaten the Zacks Consensus Estimate three out of the last four quarters with an average positive earnings surprise of 2.14%.
This company announces Q4 14 results on January 28th.
Covenant Transportation Group (CVTI) a Zacks Rank #1 (Strong Buy) is a truckload carrier that offers just-in-time and other premium transportation service for customers throughout the Unites States. Further, the company is a carrier for transportation companies such as freight forwarders, less-than-truckload carriers, and third party logistics providers that require a high level of service to support their businesses.
Over the past 60 days estimates for Q4 14, FY 14, and FY 15 have all seen significant estimate upgrades; Q4 14 increased from $0.40 to $0.74, FY 14 rose from $0.98 to $1.32, and FY 15 jumped up from $1.15 to $1.51. Further, Covenant has beaten the Zacks Consensus Estimate three out of the last four quarters, and posted an average positive earnings surprise of 14.0%, indicating that not only does CVTI beat earnings estimates but they beat them significantly.
This company annunces Q4 14 results on January 26th.
Ryanair Holdings (RYAAY) a Zacks Rank #1 (Strong Buy) operates as an ultra-low cost scheduled passagner airline serving short-haul, point-to-point routs between Ireland and the United Kingdom, Continential Europe, and Morocco. The company also provides low-fares airline-related services, including scheduling services, ancillary services, car hire service, and internet and other related services to third parties.
Over the past 30 days, estimates for Q1 15, FY 15, Q2 15, and FY 16 have all seen increases; Q1 15 rose from -$0.18 to -$0.06, FY 15 increased from $3.54 to $3.56, Q2 15 improved from -$0.23 to -$0.16, and FY 16 increased from $4.06 to $4.15.
This company announces Q1 15 earnings results on Feburary 2nd.
Bottom Line
The declining price of oil is the major driver behind the Transportation sector’s growth and expected future growth. All aspects of the segment are seeing improvements, air, sea, ground, with air and ground being the most positively impacted. This oil trend is expected to continue till the second part of 2015, where oil prices are expected to rise once again.
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