Tuesday, March 10, 2015

Transportation Stocks Running Out of Steam? (excerpt)

S&P 500 Transportation stocks have been among the outperformers during the current bull market. I have recommended overweighting them for quite some time. I lowered my rating to market weight on February 17 because I simply don’t expect that they will continue to outperform. Indeed, the index is down 5% from its record high on January 22 despite the big drop in fuel costs since last summer.

Analysts’ consensus earnings expectations for 2015 and 2016 rose late last year to reflect the drop in fuel costs. They now expect earnings to grow 22.2% this year and 12.7% next year. The Net Earnings Revisions Index (NERI) dropped sharply last month to 1.7%, following eight months of double-digit NERIs, and the lowest since May 2014.

Today's Morning Briefing: Inconclusive Trade Stats. (1) Mixed picture. (2) World production and volume of exports growing at slow paces. (3) Strong Chinese exports bullish sign for global growth. (4) Weak Chinese imports not so bullish for China and global growth. (5) German data on weak side during January after gaining in December. (6) Eurozone exports also suggest good global economy, but imports signal bad regional one. (7) Yen is boosting Japanese exports. (8) US trade data suggest strong dollar may clip exports. (9) US trucking index rose to record high during January, while port strike might have weighed on railcar loadings. (10) Transportation stocks unlikely to continue outperforming. (11) Focus on market-weight-rated S&P 500 Transportation. (More for subscribers.)

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