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Q2-2011 Earnings For Transportation Sector Is Seen Lower

 July 12, 2011 01:33 PM

The Greenbrier Companies (NYSE:GBX), a railroad freight car equipment manufacturer, announced Q3 (ending May) 2011 results last Friday. It reported a net loss for the third quarter of $3.3 million, or $0.14 per share, compared with net earnings of $4.6 million, or $0.23 per share, a year ago. Is it any indication of weakness in the Q3 earnings of transportation sector stocks?

Among the 136 transportation stocks that are generally tracked, only eight stocks showed price gains on Monday's trading. This to me indicates that the earnings are likely to be weak.

Industry level sentiment

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All of the five air courier stocks showed price declines on Monday. All of the 15 railroads stocks showed price declines on Monday. Except for China Southern Airlines Limited (ADR), the other 19 Airline stocks showed price declines on Monday. Only two out of 17 miscellaneous transportation stocks showed price increases on Monday.  Only four out of 25 trucking stocks showed price increase on Monday. Only one out of 54 water transportation stocks showed price increase on Monday.

In general, the stock market indicates a weak earnings season for the transportation sector.

The earnings outlook for air courier stocks seems to be mixed. Q2 2011 EPS forecasts for Forward Air Corp. (Nasdaq:FWRD), and United Parcel Service Inc. (NYSE:UPS) have remained the same over the past week and month while EPS forecasts for FedEx Corp. (NYSE:FDX) is up.

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Recently UAL CORP (Nasdaq:UAUA) announced combined consolidated traffic figures for United and Continental in June 2011. The traffic decreased 0.9 percent to 19.2 billion revenue passenger miles, or RPMs, from 19.4 billion RPMs in pro forma basis last year. As a result, EPS forecast for United Continental Holdings, Inc. (NYSE:UAL) has decreased over the past week from $1.590 to $1.480 (-6.92 percent) and decreased over the past month from $1.730 to $1.480 (-14.45 percent). Currently none of the companies in airlines transportation industry is showing a relative index of 70 percent - this is again a confirmation that the industry's earnings are likely to be weak. Net-on-net, I expect earnings of airlines transportation stocks to decline by 3.5 per cent in Q3-2011, compared with 2010.

Among the transportation sector stocks, railroad industry stocks are likely to do well.

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